Less than one year lease?

Question

Hi all, I own several properties in the Duke U rental market. I typically do my leases for 12 months starting August 1, because it matches the academic calendar and the market cycle. However, I have one property that already had a lease on it when I purchased it that ended at the end of May. I was able to short lease for the summer and then start the next lease in August. But the new tenants want to end the lease at the end of May again. I really don't like all the hassle with summer leasing and want to do 12 months, but I have qualified and willing tenants lined up and don't want to lose them. Should I offer the 10 month lease but at a slightly higher price to deal with the inconvenience? Or should I make them sign for 12 months and deal with subleasing themselves?

Account Closed · Answer

I used to rent to students, and my favorites were law students.  If you can get them in their first year, they'll usually stay for several years.  Sometimes, they'll want to sublet over the summer, which I allowed them to do, as they'd go away for internships.

I also discovered, that there's a market for summer student rentals, as the universities will have summer programs and internships, etc., and it's incredibly difficult for those students to find short-term housing.  So, you can charge a premium.

Why not accept these tenants and let them move out in May, but charge them more.  I think you could charge them more than "slightly" more.  You know your market and how hard it will be for them to find another landlord willing to do this for them.  If it's about impossible, then I'd make it a big enough increase to make it worth it to you, but cheaper for them having to deal with a 12 month lease.

Then, offer it at a premium for a summer rental.

Oh, and hopefully they aren't theater majors LOL.  Most grad students are pretty mellow, but not all of them.  I learned to ask what their major was.  Opera - no way, Jose.  Fortunately, applicants who sing scales at full volume are not a protected class :-)

Roy N. · Answer

Or charge the same aggregate amount of rent divided over 10-months as opposed to 12.

Roy N. · Answer

@Nikoma Thompson & Jeff Beard

Student rentals are different than others.   We have {non student} rentals where our preference is for periodic monthly leases and we ask no premium for month-2-month; nor could we likely command it in those situations.

We have other rentals where the market is predominately month-2-month in which we will occasionally offer a small discount (3-5%) to secure a longer term (1yr+) lease depending on where we see the supply/demand in the market heading.

We also have a property where, by default, we use annual leases, but, on occasion, have inked shorter term leases or periodic monthly leases at a small premium (5 - 8%) over the rent rate for the annual lease.

It is only in the student market - and then predominately with our furnished units - where we can command a 15% premium for a lease tied to the academic year.

Tanya F. · Answer

Grad students in the sciences don't go away for the summer (with the exception of those who do  fieldwork during summers). I know, I was a cell biology grad student.

Thomas S. · Answer

Why is the market in your University area forcing you to be desperate to find renters. Is the area oversaturated with rental options for the students. Aside from difficulty in finding renters where is the pressure coming from for you to take a loss or risk a loss by modify your lease.

If you are being forced to give up potentially 17% of you annual income would it be safer to not rent to students. Your rent may be lower for non students but would be more consistent being rented 12 months of the year.

I do not understand a business decision to take a loss to satisfy a renters needs. Am I missing something about your market.

Martin Miller · Answer

I'd say this is personal preference, but I'd be fine caving on 2 months worth of lease if I knew the tenant's were good payers and left the property clean.  I think a slightly increased price is in order.  Of course, if you have a line of potential renters out the door, it may not even be necessary.

Roy N. · Answer

Nikoma:

Sublets only save you a little "trouble".  We still vet our tenant's sublet candidates - though not quite a rigorously as the tenant themselves and our approval is required for the sublet to move into the unit.

@Greg S.

As soon as a candidate indicates to us they are looking for an "academic year" lease, we take the annual lease option off the table and they get to pay 85% of the annual amount in 9-months.

Nikoma Thompson · Answer

Well, what I would assumed they would do is sublet the apartment for the summer, saving me the trouble of doing so.

Thomas S. · Answer

@Roy N.      I was going to suggest the same thing but then thought they would simply agree to rent for 12 months and walk away after 10. This would leaving the landlord in almost the same position except having to taking them to court. They have already showed there hand which would have me disqualifying them as acceptable tenants.

Thomas S. · Answer

I would reject them. Why should you agree to lose money to assist them. The problem in signing a 12 month with them is you already know they are going to walk after 10 months, Find tenants that are not in their last year.