Having multiple streams of income has always been the way to go, and perhaps if you have an empty home or a basement unit to rent, you are definitely looking on how to capitalize on it.
A decent way to make use of that vacant home will be to let it out. Letting out your home either on a long or short term footing can be highly profitable, especially when done correctly.
However, the overall process is time-consuming and involves lots of legal responsibilities. As such, you will have to do some research before choosing your rental approach.
To be quite frank, no letting model is “better” than the other. It’s just about discovering which one best suits your needs and your circumstance. Let’s have a look into what you should know about long-term rent in Canada.
Long Term Rent In Canada
Long-term rent basically starts from the period of a year upwards.
Since the contract is for a long duration, it offers low flexibility in terms of the agreement. However, there are still lots of benefits to enjoy when it comes to long-term rent.
Advantages of Long Term Rent In Canada
Let’s now look at some of the advantages of renting out your property for the long term vs. short term.
1. Consistent rental income
One of the crucial elements of being a profitable landlord is maintaining steady cash flow and long-term residences offer that.
With long-term residences, you’ll earn a smooth and regular income each month.
2. A moderate passive income
Long-term tenancies in comparison to short-term tenancies are relatively easy to manage.
This is especially true provided you are industrious, and you find a good tenant.
From experience, a good tenant will always pay rent when due and help take good care of the rental accommodation in possession.
3. Mortgage Payments
Unlike short-term rent, mortgage lenders are always eager to authorize long-term rents. This is because most lenders expect an AST tenancy agreement of 6 months at the minimum.
4. No need to furnish The House
Most long-term tenants come along with their furniture.
And as such you do not have to worry about furnishing your empty property. Not needing to spend on furnishing your home further saves a lot on the expenses involved.
Disadvantages of Long Term Rent
Let’s now look at some of the disadvantages of renting out your property for the long term vs. short term.
1. Lower rates
Homes go for a much lower rate when offered in the long-term as compared to Short-term tenancies.
This is one of the main reasons why landlords always prefer to play the short-term game.
2. Legal requirements
The level of excessive bureaucracy when it comes to assured shorthold tenancies (ASTs) is quite overwhelming, and it continues to get more complicated by the day.
Contrary to common beliefs, most short-term tenancies are also ASTs. This implies that the same regulations and legal requirements apply to both long and short-term residencies.
For short-term tenancies, occupants barely need to bank on their legal rights as they stay for a short period which explains the leniency on short-term legal requirements.
However, when it comes to long-term tenancies, occupants make the residence their home.
As such, a lot of scrutinies are done to make sure all legal obligations and contracts put in place are right, especially for the landlord’s self-preservation.
3. Tenant nightmare
Evicting miscreant tenants can really be a thorn in the flesh.
The financial implications incurred by landlords during the process of evicting a rogue tenant is always on the high side.
This is because it takes a couple of months to evict a tenant who refuses to pay rent and during that time landlords have to keep making overhead payments such as a mortgage.
Problems landlords experience with rogue tenants are just pointers to the fact that landlords are not protected well enough when it comes to rogue tenants.
The decision to opt for a long-term rent will be significantly influenced by your circumstances.
However, suppose you are particular about stability in rental income every month. In that case, the best choice for you will be the long-term rent.
The long-term rent, however, works best when you have a decent tenant, and your relationship with such a tenant is relatively healthy.
Thanks for reading. Let me know your thoughts and comments below.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.