Current tenant want month to month after current lease expires

10 Replies

I have difficult dilemma with one of my rental properties. The current lease expires on 7-31-16. This is a great time to get a new tenant. The current tenant does not want to renew for long-term lease. They want to do a month to month or 3 month short term lease. The reason is they are interested in buying a house on their own in the future. They have been great tenant always paid rent on time. I am not big fan of month to month or 3 month lease. Because if I do a month to month lease or 3 month lease it will be more difficult to find new tenants in November and December. The current property could be vacant all the way to March of next year. I am trying to figure out what is best way to handle this situation. I would appreciate if someone could offer some advice on what is the best way to handle this dilemma.

The reality is that they will leave whenever they want, regardless of a 1 yr lease or month to month. Is this property in Texas? If so, you shouldn't have problems renting it out, even in fall/winter. It's just a little slower than the crazy months of May-August. I would bump them up to market rate (which in DFW area is quite high right now) and just allow them to go month to month.

you make some good points and have some legitimate concerns on the month to month. I don't like to start with them because you get short term oriented folks and most of the work and costs for landlords are in the turnarounds (and vacancies).. But I have let long term, strong tenants use them after they have been with me a year or two...and yes some leave (and as you mention they tend to do this at the slowest time for you and the best  time for them) but others stay and stay and stay...even on the month to month..

And if it is any consolation I  have some folks on the month to month who have rented for years, even five plus years.. They just mentally need the flexibility. Yes, some are planning to buy a house, but lending standards and down payments remain obstacles I suspect....so they rent on until some imagined future..

I would go with the month to month at the same rate and provide all the great landlord service and go with the " if you can find a better value in housing--buy it..." approach, and if they do eventually leave in a month or twenty months, you will do the turn around and find more than enough renters for a well kept, well priced unit most any time of year...best of luck

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I would also consider the month-to-month risk and try to quantify it. One month "additional" vacancy if they leave early December?  Prorate that over the course of a year and charge a "premium" rent for going month-to-month.  Explain why its necessary, most people will understand, but if they fight it, invite a counter offer.

I do this a 'little differently'.  I would rope them into a one year lease with a 'clause'.  The clause states that the renter will have to pay one additional month in advance with a 60 day notice to vacate.  This is a 'two-way' street as the landlord can do this as well.  In addition, they will lose 100% of their deposit due to a broken lease.  It is an expensive way for them to go, but gives them the flexibility to get out.

Hope that helps. 

AG

I would require a one-year lease renewal but would offer a buy-out clause of 2 months' rent with 30 days' notice starting at payment of buy-out clause fee and written notice that can only be exercised if rents are current.   If they do not want to agree to that, I'd likely give them notice or raise rents at lease end to whatever short-term rentals are in the area, usually much higher than normal rent.       

I had a similar request recently. My long term tenet wanted month to month because he wanted to buy a house. I offered a shorter lease at a higher rent (market value) versus a year lease at his current rate. His current rent is below market because he has been with us for years. He chose to sign a year lease. Only time will tell if that was the best choice. I offered two choices that I could live with. He's happy and I'm happy.

@Don Chen If they're good tenants and you're happy with them, charge them an extra $50 and let them go month-to-month. "Wanting to buy a house" and buying a house are two different things. It could take months for them to actually do that, assuming they're serious.

And I don't buy into the concept that the rental market drops off in winter. I can find tenants year round for the properties I manage. This past winter I signed leases on Thanksgiving weekend, Christmas Eve, and the first week in January.

@Don Chen Another option would be to let them go month to month, but put in the contract that if they move out during the months of such and such, that's there's a penalty of so much money.

As others have said, they may end up staying.  Why do a turnaround before you have to?  And perhaps they'll agree to some fair penalty if they move out during the slow months.

In TX you can pretty much write whatever you want into a contract.  Lucky you!

Bigger Pockets members,

Thank you so much for all your insights and suggestions. Everyone has provided a lot good suggestions on how to handle this matter. I really appreciate everyone taking the time to provide possible solution to this dilemma.

Sincerely,

Don

It would not be a dilemma for me as I only do M2M. It allows me slightly more control over my property and experience has shown that tenants leave when they want regardless of having a lease.

Having  a long lease is more of a benefit for tenants than landlords in my experience.