The vast majority of landlords prefer fixed-period leases. There is more security for a landlord when a tenant signs a fixed-period lease, and long-term leases can help relieve a landlord’s stress about meeting a mortgage payment on the property.
However, there are definite benefits to offering month-to-month leases. Here are just a few:
1. You can attract more tenants. Many prospective tenants do not want to be tied to a long lease. A month-to-month rental agreement is much more attractive to first-time renters, college students, renters who may be transferred or travel extensively, and renters who just prefer avoiding a long-term commitment. Although this may mean a higher rate of tenant turnover, you may reduce vacancy rates by catering to this type of tenant.
2. It is easier to identify problem tenants and take action quickly. Without a long-term lease, getting rid of a problem tenant is much easier. In most states, all you need to do to terminate a month-to-month agreement is give written notice (usually 30 days). (Note, however, that some local laws prevent evictions without good causes.)
3. It is easier to raise the rent. When you have a set lease period, you cannot raise your tenant’s rent until the lease term is over. If your expenses go up during this period, your profit margin is reduced. A month-to-month lease allows you to increase rental rates when you need to, instead of waiting for a lease to expire.
You can also charge more for monthly rents. People are more likely to pay more for rent if they are not worried about maintaining this amount over a long period of time. For some landlords, higher rent amounts can make up for the lack of security in a month-to-month arrangement.
4. You can maximize your success in certain areas. If your rental property is in a location that appeals to vacationers, college students, or other short-term renters, a month-to-month lease can make your property more desirable.
Month-to-month leases may not offer the security of a long-term lease, but they can make your rental property more attractive to a variety of potential tenants. This can help decrease your vacancy rates, limit your damages, and provide a steady stream of income.