Month-to-Month or 6 month lease?

Question

This is my first time managing my rental and I had a lot of 3-6 month lease inquiries. These leases will put me in a bad situation as I will have to rent my property in December of this year or January of next year. It's been on the market for around 10 days, no applications, around 5 showings. What do you think? Should I do month-to-month with a tenant while I find a long term tenant or just keep looking?

Patricia Steiner · Answer

We always get a lot of people who are looking for terms other than those we're offering - and the answer is no.  We do annual leases at our rental properties and we limit stays at our vacation rentals to 5 days.  I would not rush to rent it just to rent it when as soon as you do the right tenant will show up.  My recommendation is to state your terms clearly ("this property is available for a term of one year").  And, be careful with inquiries...you never know if someone is setting you up for a Fair Housing Claim or if they intend to use the property in a way that is not what you intended.

Stay the course. It's your ball and your court.  The right tenant will know how to read and will come your way.

Matthew Masoud · Answer

If you've had only 5 showings and no applications in 10 days, you may need to reconsider your price point. (unless you are in a low population area or you are not marketing effectively).

For my properties that are in landlord-friendly states, I don't mind month-to-month because I can charge a premium in rent (Market rent +$100) and I can get them out if I need to. Surprisingly they typically still stay for 12+ months

For my rentals in tenant-friendly states, I always go 1-year lease or longer.

Kim Meredith Hampton · Answer

@Hyun Jin Kwon I can tell from your price point that is overpriced. Most likely it should be around $2000-$2500, but I don’t know your market.

The 1% is based on the gross annual income derived from the rent;

example if the rent is $2500 per month, then you should try and get as close to the one percent by not paying more than $300,000 for the property

$2500x12=$300,000

Hyun Jin Kwon · Answer

That makes sense. I did price it on the higher end because my rental is renovated, but I feel like renters don't really care about it. I heard about the 1% rule which would make my property's rent at least $3850 (bought it for $385,000). I first listed it at $4000 and dropped it to $3900 yesterday. Do you think I should drop it even more? I'm in Glenview/Wilmette, IL where there aren't a lot of SFHs for rentals, but also people aren't willing to spend too much on rent.

Month-to-Month or 6 month lease?

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