For many owners or property managers, keeping their units occupied every month can be challenging and the stress of empty units overwhelming. The average property manager uses a lease to ensure the tenant will remain in place for at least a fixed number of months. But, would going to month-to-month leases better for both you and your tenants?
Four Key Points to Consider
- Are You Worried About Eviction?
When you have a tenant locked into a term lease, it will help keep them in the unit for the term of the contract. But, what happens if something arises where you need to evict the tenant? If weeding out the “risky” applicants seems to be harder than you thought, a month-to-month lease would give both parties the option to terminate the lease at the end of the month without the need for eviction proceedings and costs.
- Do You Have Tenants Who Need the Flexibility a Long-Term Lease Doesn’t Offer?
If your rentals are in areas where transient tenants such as students, those looking to buy a home, military families, and so forth, your tenants are sure to appreciate a more flexible lease policy. Along with this, if you have tenants who tend to be less financially stable, a month-to-month lease gives them the option to move out or for you to evict them should the need arise.
- Should You Take Advantage of Fluctuating Rents?
If you place your tenants on a month-to-month lease, you have the advantage of being able to make changes to the terms of the lease, including the rent as the market in your areas changes. In most instances, rental rates for properties on a month-to-month lease tend to be higher to help compensate for the possibility of vacancy. Of course, you also have the option of keeping the rent at a reasonable and stable rate. This will give your tenant the same financial security they would enjoy with a long-term lease.
- Are You Looking Forward to the End of the Lease?
No matter what type of lease agreement you have your tenant agree to, you must plan ahead to when the lease ends. Will it end at a time when filling vacancies is more challenging, leaving you with an empty unit for more than a month? In some instance, you may find using a 6-9-month lease would be to your advantage, such as with students. But, with a month-to-month lease, you may find that even during the slower times, you have a better chance of keeping your rental units occupied on a more consistent basis.
As an owner or property manager, it is your job to go over your lease from time to time and update it to meet new challenges, laws, or rules you wish to put in place. Your lease should always be such that it of benefit to both you and your tenants. It is possible that switching to alternative lease options such as month-to-month or shorter terms could well be to your advantage.