Pros and Cons of a Month-to-Month Lease

Pros and Cons of a Month-to-Month Lease

Month to month leases are always the greatest debate and everyone has their own opinion. There are some landlords who absolutely love these types of leases and other who want nothing to do with a month to month lease. Usually landlords either love them or hate them.

Pros and Cons to Consider When it Comes to a Month-to-Month Lease

Pros:

  • Instant Non-Renewal Ability– You can increase the rent and or provide the tenant notice of non renewal. You can do all of it with 30 days notice. Therefore you are not stuck with any problem tenant for any length of time.
  • Short Term– If you only want the lease to last a short period or have the flexibility of moving back into the home then month to month is for you.
  • High Revenue Producer– You can charge a premium for a month-to-month lease. So this generates increased revenue.

Cons:

  • No Security– In most states unless otherwise required a tenant can provide 30 days notice and then they are out. Same with landlords too. Most tenants want the security of a lease. Therefore the likelihood that notice is going to be provided is high.
  • Loss of Rent– In the areas you operate in there may be a definite “moving season”. The time of year where there is a lot of demand for housing and then a specific slow time. In your areas one can maybe ask for a much higher rate in great demand than in slower times. Therefore it is really important to watch the market or you might have to get less than normal simply because of the time of year you have a vacancy.
  • Vacancy– So not only do you have the chance of lost rent but also you have a chance of having an empty house.
  • Lack of Ability to Plan– As a landlord you may try really hard to “plan” your rentals’ availability dates around your life schedule. So deployments, weddings, vacations, etc. While unpredictable events such as “break leases” still happen, the predictable ones are plannable. As Murphy’s Law predicts this always happens when you are not ready for it to happen. Therefore put your leases on long time periods when its going to be a stressful time period to prevent this from being an additional stressor.
  • Keeping Rent at Market Value– In the areas that you have operated our rent prices may have jumped incredibly. Therefore you may like leases because the time span of them “coming available” and then closing. This is the perfect time to increase rents to a “reasonable” rate to prevent them from falling below the market over time. Being below market can be a killer.

A Solution:

As mentioned, you can put a premium month-to-month “clause” in your lease, such as $300 additional per month. This allows you to be compensated for any risk and leverages the advantages of the non predictability. The other effect it has is encouraging the signing of a new lease since no one wants to pay $300 more a month. This could be a HUGE bonus and very worthwhile for your month-to-month lease.

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