Monthly Rent Renewals, Or Leases, & For How Long?

5 Replies

Do you have your tenants renew on a monthly basis, or do you do leases? 

If you do leases, for how long? 3 months, 6 months, 12 months, 36 months? 

Why did you choose what you choose and have you considered changing?

Thanks everyone for the responses!

Peace, Love & Positivity.

Sincerely, Dominic Balconi,

Future BP Podcast Guest

I like to start with 1 year lease (sometimes, though rarer, a six month). 

Why? 

It gets those tenants with a longer term orientation in my opinion.

I am no vacation rental and turnovers are the bulk of the work and cost as a small time landlord. Longer term the better. I used to so more seasonal tenants (like just for summer) but it wore me out.

That said, after someone has settled in and renewed a few times, I will be open to the option of letting it go to month to month. In fact, my longest term tenant (coming up on nine years) is month to month (quit doing lease renewals at about 5 years). 

The renewal is a good time to look at the market rates, however. Month to month gives flexibility (for them and me) and much may depend on your larger strategy, scale, and market.

 For example, if all other rentals on the market are only doing one year, I might offer a six month option just as a competitive advantage (FYI about 80% of my 6 months folks renew it at least once). Some folks just like and value flexibility. 

Or if I was doing a seasonal rental again, I would elevate the rates and go for the 4 month tourist season. So the point being the term may merge with your niche or strategy.

Today, I focus more on the landlord tenant relationship and getting good people (superb payment and little or no problem behaviors) and the exact term seems to take care of itself. I renew some folks or go month to month with others and it rides with attention as needed.

On exception, the one condo I still have rented has a six month minimum rental term. That is required by the association. And I think if I had alot of rentals (50+), I would be very careful to avoid too many month to month (for risk of mass vacancies at one time) and try and stagger terms more.

Best of luck!

All my tenants are on M2M leases. They auto renew every month. In fact in my jurisdiction every term lease converts automatically to a M2M at the end of the term with exactly the same lease language. The only change is the annual rent increase.

Since the term of a lease has little to no relation to how long a tenant stays M2M is the same as a term except the landlord has greater control. Good tenants see no difference, bad tenants never want to be on a M2M lease.

@Michael Boyer I can't believe I've never even thought of staggering lease renewals! What a great suggestion. I agree that M2M and leases both have their time and place.

All my tenants also start on a one year lease except for inherited tenants which I put on a written month to month lease that automatically renews.  Each year though I review the rent and make adjustments if necessary.

Originally posted by @Thomas S. :

All my tenants are on M2M leases. They auto renew every month. In fact in my jurisdiction every term lease converts automatically to a M2M at the end of the term with exactly the same lease language. The only change is the annual rent increase.

Since the term of a lease has little to no relation to how long a tenant stays M2M is the same as a term except the landlord has greater control. Good tenants see no difference, bad tenants never want to be on a M2M lease.

 I suppose that it depends on your tolerance for risk. I certainly wouldn't want a bad tenant that I couldn't get rid of. And, I suppose that if somebody doesn't like your unit they will leave eventually. I do wonder about the potential statistical increase in occupancy if you utilize leases. I can imagine it would be slightly higher, but not in all circumstances.

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