What is a short-term lease?

When leasing out property, owners can go for a long- or short-term lease. And while the majority go for the stability of a longer deal, the short option shouldn’t be discounted.

Typically, a short-term lease is for less than six months. The approach can work well for landlords in certain circumstances, although there are some potential risks.

Short-term leases are not as popular in the larger metropolitan areas of the country. Picture: realestate.com.au

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What is a short-term lease?

Finn Simpson from Belle Property in Dee Why, says, generally speaking, a lease is considered short term if it’s shorter than six months. He says the most common length for a short-term rental is three months, but it’s also possible to have a month-to-month option.

“Short-term leases are not as popular in the larger metropolitan areas of the country, they’re more popular in the more transient locations, such as far-north Queensland,” Simpson says.

Short-term leasing is not the same as holiday letting, which refers to agreements as short as a day and generally not longer than two to three weeks.

For both property owners and tenants, there are pros and cons to a short-term lease. Simpson breaks down the key ones.

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1. Rent prices are generally higher

For landlords, a short-term rental arrangement can be profitable. “Because it’s not the standard thing to do in our larger metro areas, the landlord may be able to charge a premium or slightly higher rent than they would for a longer-term tenant,” Simpson says.

For both owner and tenant, a short-term lease can be more costly. Picture: realestate.com.au/rent

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2. Short term agreements can cover the tricky times of year

Going short term can also help a landlord caught in a tricky market or time period.

“It can get you through a tough market or a high vacancy period, for example, signing a three-month lease in November to get through the holiday season, and then looking for a longer-term tenant again in January or February,” Simpson explains.

3. Higher costs

For both owner and tenant, a short-term lease can be most costly. “It will come with extra costs for the landlord because higher turnover of tenancies means more letting fees and more marketing costs,” Simpson says.

And tenants have to consider the costs involved in moving frequently, such as removalists’ costs and bond payments, he says.

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4. Potential for more property damage

Another risk of short term rental deals is potential damage to a property.

“The high turnover of tenancies might mean more damage and less accountability. If the ingoing and outgoing condition reports are not conducted meticulously, it may be hard to track down which tenant is to blame for damage if there have been three to four tenancies at the premises over the course of a year,” Simpson says.

Also, tenants may not report maintenance issues if they are moving out shortly. They may just “put up with it”, meaning the issue could get worse and cost more to repair in the long run.

5. Stress and extra paperwork

For landlords, there’s more paperwork and stress involved in a short-term deal, because more tenancies will need to be managed. “The leasing campaign is generally the most stressful part about being a landlord,” Simpson says.

There is also stress for a tenant who has little security in their accommodation.

For landlords, there’s more paperwork and stress involved in a short-term deal. Picture: Getty

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Which is the best option?

Short-term leases are not generally the best option for landlords, Simpson says.

“The extra costs, higher vacancy and increased risk of wear and tear does not bode well for the condition of the property, nor the landlord’s back pocket. Having a long-term, stable tenant is much more desirable for a typical landlord,” he says.

However, a short term rental can work well for landlords – and tenants – in certain situations.

“For example, if the landlord plans to move back into the property on a certain date, or if the majority of tenants in the area are looking for short term leases, it can work. However, you could say that these are the exceptions that prove the rule,” Simpson says.

For tenants, they can “try before they buy” if moving into a new area and it’s a quick way for younger renters to establish rental history.

The decision ultimately comes down to individual circumstances