BiggerPockets

My lease states that it goes month to month at end of the one year term.

My experience so far has been that tenants want a new one year lease, rather than month to month, because they're afraid of being told to leave or having the rent increased.

Normally I would offer the option of a new lease, but these particular tenants have been late (beyond the grace period) with the rent a couple of times now, and there have been a couple of other minor issues.

Would you take a chance on them moving out because of the lack of a long term lease, or take a chance of a future eviction/unpleasantness on a new one year lease, if things continue to go south in terms of on-time payments?

Thanks.

Joel makes a good point. The second it.

Joel, I see your point, but I am not depending on them for a mortgage. At the same time, I don't want someone who is shaky and a potential future evictee. I don't know why they are paying late but apparently they are not managing money as well as my other tenants, for whatever reason. This is the first time I've had someone pay the rent late, out of all my tenants. Maybe I've just been extraordinarily lucky up to this point and I don't have a realistic view of other people's financial issues?

In any case I think I am going to offer them month to month at the same rent they are paying now, and raise it at some point in the future when the economy improves, or if I think the market will tolerate a higher rent.

Originally posted by Joel Owens:
How much of a late fee do they pay now??

Sorry, I missed this question when I read your original post...
The grace period is until the 5th of the month. Then they pay $50 extra for the first day they're late after that, and then an extra $10 for each day thereafter.

I let all my leases after the first year go month to month automatically, unless they ask for a lease.

As for late fees vs rent credits, when I have poor credit tenants who have otherwise good jobs and good landlord references, I up the rent and give them an on-time credit. Like Joel does. I prefer to get my rent on time than to get the late fee, and it does seem to work - so far every tenant I've used it on has paid on time.

I had an applicant on the phone the other day who, after telling me she had bad credit, and after my explaining the credit-for-on-time-payment policy, said she'd rather not do that. I thanked her for helping me screen my applicants.

Originally posted by Ann Bellamy:
I let all my leases after the first year go month to month automatically, unless they ask for a lease.

Ann, do many of them ask for a new lease? Do they get turned off that it's going to be month to month?

Originally posted by Bienes Raices:

Originally posted by Ann Bellamy:
I let all my leases after the first year go month to month automatically, unless they ask for a lease.

Ann, do many of them ask for a new lease? Do they get turned off that it's going to be month to month?

Actually, most prefer it. One said if I made her sign a lease, she'd leave. She's been there over 15 years. If they ask for a lease and they are good tenants, I give it to them. I have mostly 1BR's and starter apartments, so they prefer the flexibility.

@Christopher Brescia, the on-time credit is handled as follows

If I want 650, the lease states 700 with verbiage defining the on-time credit. Then the security deposit is also the higher amount of 700. I have NO GRACE PERIOD and it's spelled out clearly in the lease. If your rent is not in the rent box by 7AM on rent day, and the rent is picked up at 7:30 AM and the check isn't there, they are late, and it's very clear in the lease.

I also explain to them that I am not trying to jack up their rates, I simply want to pay my mortgage on time, and I need their rent to do it. (I don't, but that's not the issue)

As for the credit, if it's paid on time, they take their credit, if not, they owe the extra, and in my software, I record the rent and the credit as two different line items. I have never yet had to chase them for the extra, but if I did, I simply would not apply the credit, and if they didn't pay the full amount, they are now late for that amount. I would make a call and give them the opportunity to make it up within the 3 days.

I'm a lazy landlord, and I don't like bad tenants. I'll screen and sit on an empty apartment until the right person comes along. I don't have many bad ones, but when I do, I hate the high maintenance, so I'll act quickly to get rid of them. I once remodeled an entire bathroom and moved walls just to have a legal reason (in NH you have to have "other good cause" if they are paying) to evict the tenant.

update: I told them I was going to enforce the late fee, and they came up with the rent on time.