6 or 12 month lease whats best?

[russellpeter]

I recently joined a couple of properly management forums and got into a conversation on the best way to sign lease agreements and managing lease renewals.

What I found was one agency said that they only sign 6 months leases for all of their properties. When asked why, their response was that it is a part of their company procedure. Their reasoning to the owners was that 6 month leases allow the agency and the owner to evaluate the tenant during their tenancy to ensure they are the right candidates for the property and that they can be relied upon to pay their rent and manage the property?s upkeep.

This does make a lot of sense in determining the reliability of the tenant, but there are other ways to review your tenants. In Queensland, property managers are allowed to conduct inspections four times per year. If your agent is doing these inspections, this should give you a good indication of the tenants? behaviour and their treatment of the property. In addition, the agency should be doing proper background checks and asking for references from previous agencies before the tenant sets foot in the property.

So why are these agencies only signing 6 month leases?

When I asked for further reasoning, they responded that they charge for a lease renewal of one week?s rent. This offers a big advantage to the agency, as this process not only guarantees them not only your management fees, but an additional two weeks rent.

are you being charged for this?

If you check your PAMD 20a, the management agreement, and the lease renewal fee is not stated or outlined, your agency cannot charge that fee.

Sometimes the best advice can have hidden reasons behind it.

 

[Sez]

I didn't complete the poll because I'm a PM but, No, I do not charge for lease renewals and I try to end the lease at the best time of year!!!

The way a business will make money is by providing a good service, having more clients referred and building a good relationship with your clients. Not by ripping people off. At least, that's what I think!

Sounds like a money making plan to me. As long as people agree, they'll keep doing it!

 

[alexlee]

6 or 12 months aren't the only choices. If, say, the lease renewal happens to be in June, I'd want an 8 month lease.

 

[Joel]

I'm not very experienced so here's my 2c

I'd prioritise leases ending at the best time as I think most risk can be managed by good tenant selection.

However if quality of the tenant's application is not good then I contemplate a 6 month lease as I think it's easier to get the tenant out. PMs can clarify this. Possible increase in risk may be a pet, new job, recently separated etc. Also I would balance this with the likelihood they will actually stay a further 12 months if you offer them to renew their lease.

 

[Lil Skater]

I don't charge for lease renewals.

I'd usually recommend a 12 month lease, providing the tenant deserves it, or a shorter/longer lease depending on the time of year.

I have in the past recommended 6 month leases for the first tenancy, usually for those with a good stable job and references, but no rental history. After the first initial term, then we may offer a longer lease depending on the landlord's requirements.

 

[devank]

12 months. Can't be bothered with tenant selection and the whole process every six months (if tenants leave).

 

[MTR]

12 months. Can't be bothered with tenant selection and the whole process every six months (if tenants leave).

Not to mention loss of income and associated letting fees

 

[bashworth]

We are currently renting, and are both in secure jobs in our late 50s.

We look after the property and treat it exactly like homes we have owned in the past, the PM tells us our landlord loves the way we look after the property.

When we were looking we did not consider any property that was offering a lease of six months, one year was the minimum!

 

[Richard Feynman]

I've just signed on tenants for 14 months immediately after settlement.

I suggested this lease length to my agent after asking the best time of year to be seeking tenants in the area -- January. From there, they can renew for 12 months and I'll have a standard 12 month term up at the ideal time. Plus, they can post listings before their office shuts down for Christmas, meaning a bit of extra visibility over the break if the current tenants want to move on. It all counts.

I also wanted to buy much time as possible for the upward affect on rents the new light rail (350m from the property) will have after completion, which is due somewhere in the first half of next year.

I also thinks rent, which have been pretty flat in the area, should have started playing catch up by this time too. Double whammy.

 

[bbmick]

I would give such a PM the flick - wouldn't even consider 6 mths.

It's usually 12 mths min for me - I even do 2 years for tenants that have proven themselves to me & ask us for it.

 

[bbmick]

I've just signed on tenants for 14 months immediately after settlement.

I suggested this lease length to my agent after asking the best time of year to be seeking tenants in the area -- January. From there, they can renew for 12 months and I'll have a standard 12 month term up at the ideal time. Plus, they can post listings before their office shuts down for Christmas, meaning a bit of extra visibility over the break if the current tenants want to move on. It all counts.

Hey......That's what I need to do. Thanks for reminding me

Was just about to ring the agent to give the GO on a new tenant & I'm in the same situation. I settle on Dec 13th so that would fix my issue with the lease finishing at the wrong time of year.

 

[Richard Feynman]

Hey......That's what I need to do. Thanks for reminding me

Was just about to ring the agent to give the GO on a new tenant & I'm in the same situation. I settle on Dec 13th so that would fix my issue with the lease finishing at the wrong time of year.

Have a chat with the agent and let us know how you go.

 

[Roachy]

For those that answered 'Its included in my management fees'; How much are your management fees?

I think mine are roughly 8.8% but I have to pay lease renewals of one weeks rent.

 

[russellpeter]

For those that answered 'Its included in my management fees'; How much are your management fees?

I think mine are roughly 8.8% but I have to pay lease renewals of one weeks rent.

8,8% is at the higher end of the market in most places.

what state is your property located in? and i can give you a better rundown of the average fees.

 

[DaveM]

I do 6 months for tenants with average quality, 12 months for strong applicants who wont have to be kicked out after 6 months.

 

[NBS]

I get charged for lease renewal fee an amount of $44.00.

If a new tenant its one weeks rent $360.00

If there is a new tenant the agent advises either a 6mth or 12mth and gives the reason. Mind you if the agent says 6mth because they are not sure of the person I'm more inclined to say no and wait for one for 12mth.

The current tenant wanted 6mth and I agreed to the reason why and they signed for another 12mth.

They are very good tenants and I will be trying to keep them on for another twelve months. Don't have to worry about this till Feb 14

Brian

 

[neK]

What I found was one agency said that they only sign 6 months leases for all of their properties. When asked why, their response was that it is a part of their company procedure. Their reasoning to the owners was that 6 month leases allow the agency and the owner to evaluate the tenant during their tenancy to ensure they are the right candidates for the property and that they can be relied upon to pay their rent and manage the property?s upkeep.

My agent does this too. Then after the 6 months (could be longer or shorter, depends on when the peak period is), he signs them up to 12 or so (ensuring new lease ends during a peak period).

Sure he charges me an extra lease fee $15 (my portion of the lease agreement) and the tenant the other $15.

But its a small price to pay to make sure you're not locked in with a bad tenant who presented well initially.