How to calculate rent increase for Month-Month vs Yearly Lease

8 Replies

Hello all.  My tenant in my only rental property might be moving out, but has asked if we would consider a month to month.  We said yes.  I just need to know what is a way to calculate a fair rent for a month to month vs a the current amount we charge in our year lease.  I searched google and could find a good answer.  This house is in Henderson, Nevada.  Their first year, 2016-2017, the rent was $1600, second year we increased it to $1650.  They have been great tenants and we want to accommodate them while they search for a house to buy, etc.

Thanks for any feedback! 

The majority of state landlord tenant regulations see a term lease automatically become M2M at the end of term. Rarely is the rental rate changed due to this conversion aside from the normal yearly increase.

Many landlords may choose to charge a higher rate to dissuade tenants from M2M leases, I prefer M2M and use nothing else. I charge the standard market rates regardless. If you feel you can squeeze more money out of a tenant then someone will most likely give advice however it is really up to you to questimate how much the tenant is willing to pay. On the other hand he could have simply sign a term lease and done as most tennats do by breaking their lease when it is time for them to go. 

The most important piece is including he notice period for termination and a penalty for not honoring the notice period. Another thing you might consider is do you have a time frame that is harder to fill such as the december january timeframe. Do you want more notice then? You could put an increase for M2M but I would make it more of a slight convenience fee that isnt too much since they could have just agreed to one year and then broke the lease.

Keep in mind you'll need to give 45 day notice to increase rent.  Like others have mentioned, a vacancy during November and December would not be beneficial.  I'd let the current tenants know that you're willing to cooperate, but that you'll either need them to commit to a longer term before mid summer, or they'll need to vacate.  

Since rents have continued to increase, you shouldn't have a problem increasing to market in this situation.

Phillip Dwyer, Real Estate Agent in NV (#BS.0142939)
702-212-1912
Originally posted by @Phillip Dwyer :

Keep in mind you'll need to give 45 day notice to increase rent.  Like others have mentioned, a vacancy during November and December would not be beneficial.  I'd let the current tenants know that you're willing to cooperate, but that you'll either need them to commit to a longer term before mid summer, or they'll need to vacate.  

Since rents have continued to increase, you shouldn't have a problem increasing to market in this situation.

Thanks for the input.  But, where is the requirement for 45 days?  Nevada law was 30 days AFAIK.

@Kurt Keyes :

NRS 118A.300Advance notice of increase of rent.The landlord may not increase the rent payable by a tenant unless it serves the tenant with a written notice, 45 days or, in the case of any periodic tenancy of less than 1 month, 15 days in advance of the first rental payment to be increased, advising the tenant of the increase.

Phillip Dwyer, Real Estate Agent in NV (#BS.0142939)
702-212-1912
Originally posted by @Phillip Dwyer :

@Kurt Keyes:

NRS 118A.300Advance notice of increase of rent.The landlord may not increase the rent payable by a tenant unless it serves the tenant with a written notice, 45 days or, in the case of any periodic tenancy of less than 1 month, 15 days in advance of the first rental payment to be increased, advising the tenant of the increase.

Thanks for the clarification Phillip!

@Kurt Keyes That's a great question and is a very tricky one. This really depends on you and your preferences and risk tolerances. I can't speak for everyone but I can speak from my management experience. With our plex's we charge 12% more than the standard rent for month to month leases. For a typical 6 month 2/1 we charge 850 for a 6 month lease and month to month is 952. You have to remember this is a greater risk for you, because as people have said they can leave you high and dry during a bad time of the year. So I personally believe people should pay more if they aren't willing to commit to a longer term. That's just my 2 cents though. Do what you think is right and will benefit you most. Good luck!

Originally posted by @Michael Guzik :

@Kurt Keyes That's a great question and is a very tricky one. This really depends on you and your preferences and risk tolerances. I can't speak for everyone but I can speak from my management experience. With our plex's we charge 12% more than the standard rent for month to month leases. For a typical 6 month 2/1 we charge 850 for a 6 month lease and month to month is 952. You have to remember this is a greater risk for you, because as people have said they can leave you high and dry during a bad time of the year. So I personally believe people should pay more if they aren't willing to commit to a longer term. That's just my 2 cents though. Do what you think is right and will benefit you most. Good luck!

 Excellent info Michael.  Much appreciated to all of you.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.