Keep on a Month-Month, or Convert?

9 Replies

My newly acquired Duplex has a long-term tenant on a Month-Month. She has been in for 5 years and has been a good tenant from all info that I have. I approached her about signing a new lease. She does not want to sign a 1 year lease, but would sign a 6 month. I have thought about 2 options:

1. 6 Month lease, followed by a 12 month.

2. Keep her on a month-month.

Option 2 could have some advantages, as if she does not turn out to be a good tenant, I will have an easier out.

What are your thoughts?

Landlording made easy.
Best-in-Class Platform for DIY Landlords
List unlimited units, screen tenants, draft and sign leases, and collect rent—all free.
Use Avail—Free!

All my tenants were on a M-T-M.  It sounds nice at first to know that a tenant is locked into a years lease when you go on an "Annual Lease Agreement", UNTIL things go wrong, and then you wished you went on a M-T-M.

When a tenant is on an Annual Lease Agreement, they can still "cop out" on you.  Yes you can sue them for the remainder of the lease if they didn't try to find another tenant for you that you approved of, but most times, they are hard to collect from in the end.  

When you are on a Month to Month Lease Agreement, you and the tenant have a choice to  terminate the contract without too much of a hassle.  It is a win win situation for both parties.

My husband and I had tenants that stayed with us for 20 years on a M-T-M, and only a few tenants who moved before their six year tenancy with us.  

When you have a good Landlord/tenant Relationship, they want to stay.  If you don't have a good landlord/tenant relationship,  the tenant will move no matter what.  

M-T-M- is my vote!

Nancy Neville

@Scott Weaner  

I think the type of lease can depend on the type of organization that you run and what other value an annual lease can bring. We uniformly lease single family homes and we have standardized on annual leases. Doesn't really change the demeanor of the tenant but that's what they expect when renting a house. If things go sour, they still get an eviction notice like MTM tenants would. But as a side note: If you are running larger communities that sell in the future by using a cap rate, it can change the value a perspective buyer might pay if the leases are longer term as long as you are running a tight ship. When I used to run my public accounting firm, I had clients that paid less for MTM properties as the cap rate was in flux as there wasn't a rent roll that had a longer period thereby alluding to more vacancies. 

Our market is VERY seasonable base! Therefore we ONLY want our rentals coming up during moving season if we have a choice. Therefore we  personally only do 1 year tenancy unless they are going to come up at an unoptune time. Than we will do a longer or shorter term to make sure the houses come up at the right time.