Pros and Cons of Month to Month Lease

Although the security of a 12 month or longer lease can be a good thing when you've got a quality renter occupying a property, it can be a nightmare when you've got a problem tenant. Having a problem tenant on a month-to-month rental plan makes like a lot easier because it means less legal maneuvering to get them out of your property. There are some other benefits to this type of lease, but there are some disadvantages as well. Let's take a look.

The Pros of Having a Month to Month Rental

You can make changes to a lease easily with this type of rental agreement. Many communities require just 30 days notice to a tenant for you to change the rules on your property. That means you can revoke a rule about pets if you wish, implement a non-smoking policy, or create other reasonable stipulations that work with local laws to better protect your property.

This also includes being able to change the amount you charge for rent with proper notice as well. As long as there are no restrictions in your community regarding rental amounts, you can set a new rent when you need to do so instead of having to wait for the end of a guaranteed lease. Just don't price yourself out of the market.

The final benefit of this type of rental situation is that it gives you flexibility to reclaim the property if you wish. If you decide to transition from a rental to making that property a permanent address, then you won't have to wait long to do so. For renters who are transitory as well because of work, these agreements will help them secure a good place to live as well, giving you extra income opportunities.

The Cons of Having a Month to Month Rental

The benefits that you receive are similar to the benefits your tenants receive. Just as you can change the rules of the lease with proper notice, they can vacate your property with a proper notice of the same amount of time. If you don't work on building a relationship with your tenants, then you'll likely find a vacant property in your portfolio.

There is no termination charge for breaking the lease either. If your tenants decide to just move out, then they won't owe you for any additional months of rent and may not even owe you anything for the cost of finding new tenants.

The return on your investment may also be lower with these short-term leases. If you're having to pull multiple credit reports, background checks, and other pre-screening tasks, you're losing money. Even if you have tenants pay for the application, it still takes time to run these reports and as a landlord, your time is definitely worth money.

A month-to-month lease may work well in certain situations, especially when rental pricing is rising in a local market. When demand is high and options are short is the best time to utilize this option. You can then transition to a 12 month or longer lease if occupation rates begin to decline.
Posted on Jun 26, 2014


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