Investor · San Francisco, CA · Member since 2015 · 302 posts · 206 votes
I know this question has been asked a bunch on the forums but I can't find any that are specifically for large commercial multi families. (5 or more units)
What are the pros / cons of re-signing the tenants or letting them go month to month?
Anything to be aware of that residential investors don't have to worry about?
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
@Nicholas Lohr When we had tenants in California they were on leases and we renewed them each year for another year. Now that we live in Washington state our tenants are all MTM from day one. At first it felt vulnerable, however we soon realized we could get them out with a simple 30 day non renewal notice, or raise rents anytime also with a 30 note.
Tenants are free to go by giving us a 30 note so there is no testy discussion about how long is left on the lease. Generally tenants will go when they go anyway so what's the worry?
Leases can be a real liability if you are buying MF apartment buildings; they will keep you from doing timely rehabs to reposition and raise rents, you will have to wait till the leases are over. I have a 12 unit and duplexes; the tenants are all MTM.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
@Nicholas Lohr When we had tenants in California they were on leases and we renewed them each year for another year. Now that we live in Washington state our tenants are all MTM from day one. At first it felt vulnerable, however we soon realized we could get them out with a simple 30 day non renewal notice, or raise rents anytime also with a 30 note.
Tenants are free to go by giving us a 30 note so there is no testy discussion about how long is left on the lease. Generally tenants will go when they go anyway so what's the worry?
Leases can be a real liability if you are buying MF apartment buildings; they will keep you from doing timely rehabs to reposition and raise rents, you will have to wait till the leases are over. I have a 12 unit and duplexes; the tenants are all MTM.
Investor · San Francisco, CA · Member since 2015 · 302 posts · 206 votes
6y
@Bjorn Ahlblad
makes sense appreciate the response, thank you.
At this level we’re not dealing with 30 year fixed anymore so do you happen to know if month to month vs leases affects the refinance process with banks?
Rental Property Investor · Cranford, NJ · Member since 2019 · 245 posts · 148 votes
6y
I truly think leases unless with a company (think Starbucks or something) really do not help the landlord. What I do is have a new tenant (residential in this example) sign a new 12-month lease. After that, if they go month to month it's fine if they wish to renew, great.
My thinking is this, if you have 10 months left on a lease and the tenant says I will be leaving at the end of the month, will you sue them? Unless you have an attorney on the payroll I'm not going to sue. I prefer the tenant to leave without problems, give me the keys and leave the apartment in good condition. Vs the contra to that, they get mad and say "now you can evict me". Most responsible people will not want an eviction on their permanent record, but better safe than sorry.
BUT, on the flip side of this coin, it does suck to have a tenant leave during the "slow" period. You may be forced with a vacant apartment for a longer time period. I'm experiencing that right now, not fun.
Rental Property Investor · Smyrna, GA · Member since 2018 · 974 posts · 645 votes
6y
If the person you bought it from seemed to be managing the property well and it isn't in disrepair or has a lot of defferred maintenance, then the tenants may be fine and no need to move them to month to month. When their leases end, just offer them a new lease (and rent) with your new program. If they want to stay, (and you want them to stay), then great. You'll get to know them and which ones are worth trying to keep.