BiggerPockets

I know some of you are only doing month to month leases for flexibility and control. But what do you do if you have a really good prospective tenant who "needs" a longer term? Perhaps they just left their last rental early because it was sold or foreclosed on. Do you make exceptions to your month to month leases?

Jon,

I normally try to lock in good tenants as long as possible, and in exchange for an extended term (2 years+), offer them to lock in their rent for that period. The extra 3-7% that I miss out on is made up by not having the turnover, which is very expensive.

I also try to get them to sign 1 year leases as a bare minimum. If they're not stable enough to stay for 1 year, they're not stable enough for me.

Finally, I have gotten all my rentals now to where they expire in late June or July. July/August is the best time to find tenants. You'll have the largest pool to choose from.

I used stagered leases when two or more leases were going to be due about the same time, like one renews and then an empty is filled. Make one for six months then a year, you're less likely to have mulitple units vacant at the same time in the future. This worked well for a 12 units. but it does take a bit of a sales job sometimes and you can't really get them staggered completly. Sometimes a small discount was used but not always. Just said, we have a 3 month available that renews for one year!

I 2nd what Don said.

Class C and D apartments need short-term leases for flexibility.

Classes A and B I generally want to keep tenants for as long as I can because the tenant base stands to get a credit ding and a loss of deposit if they break the lease.

I disagree Mike.

If an DINK couple with professional degrees rents one of my mid-Austin units to avoid traffic then I would PREFER to lock them in for as long as possible.

If they allow other scumbags to move in that violates their lease and I can evict them.

I don't know much about your business, but my suspicion is that you have a bunch of low-end rentals and that is coloring your perspective. I don't know anyone that has strong class A tenants that wouldn't want to keep them for a long period of time to minimize make-ready and turnover costs.

Out of hundreds of tenants over the years I can only think of 4 that were trouble and about 10 or so that were difficult, but were trainable and complied with the requirements we'll say. The success boils down to the application process. We used written verifications and it took about three to four days to approve a tennant. The process was very similar to a mortgage loan application. I doubt many landlords would go to that extent or time. The other factor is having desirable properties and not a hole in the wall dump, that attracts trouble. Many of our tenants were college or young families, very few shacking up singles and a few mature tenats. Just the way it happened. Quailty properties + strengent underwriting = qulaity tenants. It's an art as much as it may be a science. Maybe luck had alot to do with it, but that's alot of luck, I tend to think it was because we were really picky. The market has alot to do with what you have to work with as well, but I stayed away from those markets. Cash flow was important, but the real money comes from appreciation. We never had the most expensive rental for like units, always a little less which kept many in place and vacancy rates down.

I screen carefully and very rarely have to ask a tenant to move out. But when I want them out, I really want them out and don't want to wait 12 months to get rid of them.

My very worst tenant was completely wackadoodle crazy on top of being a demanding whiner. He came with an 800 credit score, excellent income, and sterling landlord references.

If I'd been stuck with him for 12 months, I would have shot him well before the lease was up.

Did I mention he was nuts? He had a long drawn out temper tantrum because it was cold in the house, yet refused to turn the heat on because he "couldn't afford to run the furnace". He was furious because I couldn't get the temperature up without turning the heat on. (it was SNOWING outside!). He kept showing me that he could see his breath, and he had a thermometer to show me (repeatedly) that it was only 50 degrees inside the house.

He also had a temper tantrum because he vacuumed the rug and got 1/2 a canister of "dirt". His roommate had two 130 pound hairy husky dogs. Yet I was a slum lord because there was dog hair in the carpet and the house was "filthy".

He wanted me to replace all his groceries, have a hazzmat team disinfect the house, put him in a hotel, and pay for all his restaurant meals, because he thought he saw a mouse. No evidence of a mouse, but I set traps and bait. When he announced that he was going to report me to the housing authority because I wouldn't call the hazzmat team in, he got his 30 day notice on the spot.

Seriously. He had excellent landlord references. The only thing I can think was that he went off his medication.

Any time I hear the word "lease" I think of that tenant.