From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1522 topics, 14436 posts — Last Post 04/23/14, 11:39AM

BiggerPockets Exclusive PRO Area

118 topics, 844 posts — Last Post 04/23/14, 08:28AM

New Member Introductions

10968 topics, 86438 posts — Last Post 04/23/14, 12:15PM

Real Estate Success Stories

397 topics, 6188 posts — Last Post 04/23/14, 07:49AM

General Real Estate

General Real Estate

Buying & Selling Real Estate

5986 topics, 47182 posts — Last Post 04/23/14, 12:16PM

Renters

649 topics, 5856 posts — Last Post 04/23/14, 10:42AM

Get Foreclosure Help - Help Stop Foreclosure Forum

316 topics, 2557 posts — Last Post 04/21/14, 03:59PM

Home Owner Association (HOA) Issues & Problems Forum

238 topics, 1611 posts — Last Post 04/23/14, 04:02AM

Do it Yourself

658 topics, 6316 posts — Last Post 04/23/14, 09:50AM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3704 topics, 29699 posts — Last Post 04/23/14, 11:00AM

Real Estate Guru, Book & Course Reviews and Discussions

1139 topics, 11596 posts — Last Post 04/23/14, 11:28AM

Ask About A Real Estate Company

743 topics, 7344 posts — Last Post 04/22/14, 11:25PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5630 topics, 43908 posts — Last Post 04/23/14, 12:21PM

Rehabbing and House Flipping

3349 topics, 31094 posts — Last Post 04/23/14, 11:14AM

Real Estate Development & New Home Construction

554 topics, 4694 posts — Last Post 04/22/14, 09:17PM

Innovative Strategies

705 topics, 6044 posts — Last Post 04/22/14, 04:06PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

867 topics, 6692 posts — Last Post 04/22/14, 08:22PM

Rent to Own a.k.a. Lease Purchase, Lease Options

698 topics, 4923 posts — Last Post 04/23/14, 12:22PM

1031 Exchanges

143 topics, 1062 posts — Last Post 04/22/14, 03:21PM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1691 topics, 11313 posts — Last Post 04/22/14, 09:26PM

HUD, VA, and Tax Sales

416 topics, 3102 posts — Last Post 04/22/14, 01:39PM

REOs

1217 topics, 10595 posts — Last Post 04/23/14, 09:23AM

Short Sales

1538 topics, 13139 posts — Last Post 04/22/14, 01:38PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7243 topics, 71100 posts — Last Post 04/23/14, 12:33PM

Mobile Homes & Mobile Home Park Investing

639 topics, 5144 posts — Last Post 04/23/14, 07:57AM

Investor Basics

Starting Out

7725 topics, 60648 posts — Last Post 04/23/14, 11:42AM

Investor Psychology

431 topics, 6107 posts — Last Post 04/20/14, 06:04AM

General Real Estate Investing

4727 topics, 37314 posts — Last Post 04/23/14, 12:12PM

Real Estate Investor Marketing

1737 topics, 14144 posts — Last Post 04/23/14, 12:07PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1412 topics, 9004 posts — Last Post 04/23/14, 08:50AM

Multi-Family and Apartment Investing

1123 topics, 9365 posts — Last Post 04/23/14, 12:36PM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

644 topics, 4910 posts — Last Post 04/23/14, 10:40AM

Business Basics

Goals, Business Plans & Entities

832 topics, 7571 posts — Last Post 04/23/14, 09:48AM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2803 topics, 20131 posts — Last Post 04/23/14, 12:24PM

Property Insurance

310 topics, 2055 posts — Last Post 04/22/14, 07:38AM

Personal Finance Discussion

330 topics, 2754 posts — Last Post 04/22/14, 12:06PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2852 topics, 19841 posts — Last Post 04/23/14, 12:23PM

Creative Real Estate Financing

1217 topics, 8845 posts — Last Post 04/23/14, 09:39AM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1217 topics, 8024 posts — Last Post 04/23/14, 08:23AM

Bankers, Lenders, and Mortgage Brokers

442 topics, 1929 posts — Last Post 04/22/14, 11:03AM

Contractors

269 topics, 1690 posts — Last Post 04/22/14, 07:33AM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

2012 topics, 11723 posts — Last Post 04/23/14, 12:05PM

Americans & International Real Estate

162 topics, 568 posts — Last Post 04/14/14, 11:19AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

65 topics, 439 posts — Last Post 04/22/14, 09:27AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15078 topics, 54101 posts — Last Post 04/23/14, 12:17PM

Real Estate Events and Happenings

167 topics, 2590 posts — Last Post 04/23/14, 09:12AM

Off-Topic

Off Topic

Off-Topic

2907 topics, 32441 posts — Last Post 04/23/14, 11:24AM

Housing News & Real Estate Market

920 topics, 8390 posts — Last Post 04/23/14, 11:47AM

BiggerPockets Real Estate Investing Summit

97 topics, 1752 posts — Last Post 04/23/14, 04:51AM

BiggerPockets Resources

Forums » Landlord & Rental Property Questions » Going month to month at end of 1 year lease

Going month to month at end of 1 year lease

15 posts by 8 users

Signup

· Orlando, Florida


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.



Commercial Real Estate Broker · Canton, Georgia


You shouldn't be relying on the tenant to pay the rent on time to pay your mortgage.

If you are doing that you are making a mistake.How much of a late fee do they pay now??

You could increase the late fee slightly.If they pay 100 a month late that is 1,200 a year to your bottom line !

What you want from the tenants is a PATTERN.A PATTERN shows stability even if paying late.What you don't want is the tenant being unstable and trying to run your business not knowing what they will do month to month.

I would just increase the late fee and shorten up the grace period and eviction time line.This will force the tenant even though paying late to pay earlier than before.

You could also up the rent on the new lease but offer a rent credit if they pay early every month.

Say rent is 800 now with a 100 late payment.Up rent on new lease to 850 a month but 50 dollar rent credit if they pay on time but still keep 100 late payment.

You are just trying to condition them in a nice way to pay you first and not after utilities,car etc.


Small_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


Rehabber · Toronto, Ontario


Joel makes a good point. The second it.



Real Estate Investor · Chattanooga, Tennessee


If you sign the lease, then you are stuck with them. If you are not thrilled with them, they why would you want to lock them into another year? You can actually serve them with a change in tenancy that the lease is now month to month, AND give them a rent raise at the same time. Or keep things the same. As a rule, I don't give new leases to problem tenants. I might let them stay on month to month if I'm stabilize another property or two and don't want the added vacancy and turn costs, but once everything else is stabilized, I will focus on getting them out and getting better tenants in.



· Orlando, Florida


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.



Developer · Orlando, Florida


You've been lucky so far if this is the first late payment issue you've had. I'd keep them in on a month to month basis and if they pay late again i'd market the property and tell them they've got 30 days. Certainly agree with the raising the late fee point.



· Orlando, Florida


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.



Commercial Real Estate Broker · Canton, Georgia


You have just been lucky so far.Like I said if they paid late every month and I made the extra coin that is great for me.

What you don't want is rollover of owed funds into the next month.

I would change the late fee to a much higher amount say 125 or 150.

What amount is the monthly rent??

In some areas of rentals the type of tenant you have is about as good as it gets.It depends on the area and tenant base.If you get rid of them you will have re-tenant costs and lost rent.

So I would only lose them if it gets much worse.


Small_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


Hard Money Lender · Tyngsboro, Massachusetts


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.


Small_small_logoAnn Bellamy, Buy Now, LLC
Telephone: 800-418-0081
Website: http://www.buynowhardmoney.com
Hard money lending in NH and MA, and for free networking in MA, http://www.BlackDiamondREI.com


Real Estate Investor · Springfield, Missouri


Rent credits, I have thought about that but never did it, I like that! Take a $500 rental, charge $550, discount it $50 if paid by the 5th and a 10% late fee after the 10th or 15th at $605! Now that's an incentive to pay on time!

It's a rough call on what to do here as we don't know the issues but I'd consider the market and how many headaches it's worth to rent to them or the vacancy period and take your chances again.....at least you know what you have....Good luck!


Financexaminer@real estate investor dot com


· Orlando, Florida


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?



Rehabber · Vernon Rockville, Connecticut


The on-time credit is an interesting idea I'd never seen before.

@Ann Bellamy @Joel Owens How do you handle the on-time credit? Do you write a check back to them each month or do you accrue the credits and send checks out at certain points in the year?

@Bienes Raices I have been renting for over two years (I know, I know, i have only recently seen the light of REI..) and I personally like that my rent went from month-to-month. Our agreement is only reviewed (for increase) once a year and as far as terminating I am required to either give two months notice or I can leave whenever but I am on the hook for 2-months rent unless they can find a replacement sooner. It takes away the threat of end-of-lease stress and I feel I can move at any time and not be screwed. Speaking from a renter's perspective, I prefer a month-to-month.



Hard Money Lender · Tyngsboro, Massachusetts


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.


Small_small_logoAnn Bellamy, Buy Now, LLC
Telephone: 800-418-0081
Website: http://www.buynowhardmoney.com
Hard money lending in NH and MA, and for free networking in MA, http://www.BlackDiamondREI.com


· Orlando, Florida


@Ann thanks for the detailed answer, I always enjoy your posts.

@Christopher back when I was a tenant I liked it too when it went month to month...maybe the tenants I've had so far have been an anomaly.

I'm just going to let it go month to month and keep the rent the same (for now) and see how it goes.



· Orlando, Florida


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





Sign up