Thinking of offering month-to-month leases on your rental property? This flexible approach has its pros and cons, and whether it’s right for you depends on your goals and property needs. Here are a few benefits and drawbacks to help you decide.
**Pros:**
1. **Flexibility:** Month-to-month leases attract business travelers, short-term renters, and tenants in transition. It’s a low-commitment setup, allowing you to end the lease with 30 days’ notice if needed.
2. **More Frequent Rent Adjustments:** Unlike a twelve-month lease, a shorter lease term lets you adjust rent regularly to reflect inflation or changing market conditions.
3. **Easy Transitions:** With month-to-month, there’s no penalty if a desirable long-term renter comes along or the current arrangement isn’t working out. Just ensure you’re compliant with local laws by consulting a legal professional.
4. **Retaining Quality Tenants:** A month-to-month option can keep good tenants who want flexibility without needing to sign a new lease every month. Adding a “holding-over” clause in your lease can simplify this.
5. **Protecting Cash Flow:** Including a month-to-month provision in your standard lease is a smart backup if a tenant doesn’t sign a new lease at the end of their term, ensuring continued rent payment.
**Cons:**
1. **Uncertain Tenure:** Not knowing if a tenant will stay beyond 30 days can be unsettling, especially if a vacant unit affects your bottom line.
2. **Short Notice for Turnover:** While you can end the agreement quickly, so can the tenant, potentially leaving you in a rush to fill the vacancy. Consider maintaining a waiting list to counterbalance sudden move-outs.
3. **Variable Income:** Month-to-month leases may attract short-term renters, leading to less stable income compared to a traditional lease.
In the end, offering month-to-month leases is a strategic choice that may appeal to flexible renters and allow you to adjust quickly in a dynamic market. However, these leases may also require a higher tolerance for vacancy risk and income fluctuation. Weigh these factors and consult your legal advisor to make the best decision for your business.
– Joel Moyes – Designated Broker, Red Brick Property Management (Greater Phoenix Area)
RentRedBrick.com to learn more.
Red Brick Property Management is located in North East Mesa. Established in 2001, we serve a growing need for a professional property management company that specializes in residential rentals. We have sold, owned, and managed real estate in the valley for over 15 years. We provide property management services for investors, first time landlords, and the accidental landlord. Red Brick Property Management provides tenant placement services for landlords who would like to do their own property management.