MTM Lease vs 12 Month Lease

[Jerome Morelos]

Hello BP, I have a property that I'm getting ready to rent out. The main house will be a room-by-room rental and the ADU will be a MTR. My question is: Should I use a MTM lease or a 12 month lease? If I do a monthly lease, will that affect my future financing in terms of using the rental income to qualify for future properties?

Thank you for your time!

[David M.]

@Jerome Morelos

I assume you are asking about the room rentals?  A month to month should initially hamper your ability to get financing.  But, after you've been going a year or two they should be able to consider the income.  That sort of one reason some do a 1yr lease then month to month.

Also, it depends on what sort of loan you are going for in the future. Standard residential conforming loans will consider it more closely. The non-residential stuff, e.g. DSCR, shouldn't care as much -- if you need a lender referral send me a message (BP's policy doesn't allow referrals on the open board).

I believe that answers your question.  Otherwise, also consider which format works best for you and your market.  Good luck.