Should we increase price of a month-to-month lease for good tenants?
Hi friends! Looking for some thoughts. We have really solid tenants in our SFR. Their lease is up in July and they asked for a few more months. We do not have a month-to-month clause in their lease because we wanted to have more control over the timeline and hoped we wouldn't have to re-list it in the winter months. These tenants are ANGELS and we want to keep them happy, but we also recognize that giving them a few more months could push us into the winter, which may mean it'll sit vacant for longer and we'll have to cover that cost. Curious to know — do you increase your rent on a month-to-month basis? Or do you keep it as-is if you know the tenants are great and you want to keep them in there for longer?
Real Estate Agent CO (#100096523)
I typically don't worry about lease expirations, though I have always owned in FL/CA where the 'winter' may not be as much of an issue. Personally I sign a 1 year lease, and let them go MTM after that. My places tend to be transitional for singles in the beach area apartments, moving to the nice but affordable 'burbs' duplex and then leaving in 2-3 years to buy a home. So I get top rent (typically $200-300/mo higher than competition) when they first move in and then keep it steady until they leave and I raise it at that point.
Hi @Brittany Guimond! Best practice is to increase rent on tenants who wish to go MTM. Most professional companies will increase between 8-10%.
While we always want to show appreciation, especially to great tenants, we have to treat it like a business. You absolutely do not want a vacancy between Thanksgiving and Presidents Day. Your days on market will be longer and you may also be forced to lower rent to fill the vacancy. The increase in rent is meant to cover these expenses. Plus, who wants to be doing showings during the holidays?!
Property Manager Colorado (#EA100087146)
- Acorn and Oak Mile High
- 936-520-4048
- https://milehigh.acorn-oak.com/
#3 Managing Your Property Contributor
Are they planning on moving anyhow? If so, either do a 2 month extension and tell them that is the longest you can do it or tell them no.
You could say something to them like "you can go M2M with no increase as long as you are out by September 1; after that, the rent will increase by X% or you can sign a new lease."
Quote from @Brittany Guimond:
I'm also in a market that slows down in the winter months. My policy is to advertise everything as a one-year lease. If something opens in the winter and I just want to get it filled for those colder months, then I will rent it month-to-month just to get through winter. If it's spring - fall then I only sign one-year leases or I require the Tenant to pay a 25% increase for month-to-month. You'll be amazed how many people will pay extra for that option!
I would give them written notice that you need them to sign a one-year lease at $XXX per month no later than June 30th. If they don't, or they prefer to stay M2M, then their rent will increase to $YYY per month. Then they can choose.
