While most property owners choose to offer tenants yearlong lease agreements there are those owners that prefer month-to-month lease agreements instead. But why?
If you are curious about the pros and cons of month-to-month lease agreements vs a yearlong, and questioning what the better option is for you and your property then continue reading below.
Typically, when you are discussing lease options your most common option would be a 12-month lease with the option to renew close to the end of your lease term. However, a month-to-month lease is a 30 day or 1-month contract that typically renews automatically each month until the resident decides to move or the owner decides to not continue offering the lease the following month. This is generally a popular option for a tenant that may be moving to the area and just needs temporary housing until their property is available or finished.
Now, we will examine both the pros and cons of offering month-to-month lease agreements.
- Flexibility: One of the biggest reasons property owners like to offer month-to-month lease agreements is because of the flexibility this type of lease offers both themselves and their tenants. This will give the owner and the tenants the ability to “break” the lease at any time they need.
- No more stress about bad tenants: There is nothing worse than placing a bad tenant in your rental property. Without being tied to your typical 12-month lease, you are not required to keep them any longer than you want to. You can easily end the contract by providing a 30 or 60-day non-renewal notice.
- Premium Rent: Many renters are aware that choosing to go with month-to-month leases means that the rental rate will be higher each month compared to what it would be in a 12 month leased property. The premium rental rate will typically offset any cost that is occurred from changing the unit from one tenant to the next.
- Higher turnover rate: When you have month-to-month renters you potentially could have a new renter each month. This means between each tenant you will need to get the unit ready. As we discussed above, the higher rent rate should cover these costs, however, there is always the chance that a ternate could cause damage to the property in the short time they are there. This could potentially mean paying for carpet replacement and full paint jobs versus touch-ups.
- Difficulty placing new tenants: Because previous tenants only require a 30-day notice before leaving this could become a challenge when finding a new tenant to move in right away, which may mean you go a month or two without rental income.
- More wear and tear: If you are constantly moving tenants in and out of the property, there will likely be more dings on the walls and floor from constantly moving things in and out.
Ultimately, owning rental property is a lot of work and full of tough decisions. Plus, drafting, and enforcing a lease agreement can be challenging for even the most experienced property owner, regardless of whether you opt for a month-to-month or yearlong lease agreement.
There are pros and cons to both a month-to-month and a 12-month lease agreement for your rental property, and what will work best truly depends on your needs as a property owner. However, self-managing your property does not have to be an added stress to leasing your rental.
If you are looking for guidance or need help drafting the perfect lease agreements for your month-to-month tenants or yearlong ones, contact All County Property Management Group today!