Rental Property Investor · Altamonte Springs, FL · Member since 2018 · 185 posts · 97 votes
Hello everybody,
When you guys are getting ready to place a new tenant what do you guys prefer, contract or moth to month? This is my first time renting out one of my houses and my lawyer recommended that I do month to mont, Instead of 6 months or one year lease. She said that if I end-up with a bad tenant is easier to get them out, then if I had a rental agreement.
I am a major supporter of the value in M2M leases. I thoroughly screen all applicants as every landlord should do regardless of lease choice. All my tenants are on M2M from day one.
Landlords are turning their investment property over to total strangers that have no inherent commitment to their landlord regardless of a lease. When they need or choose to leave they will leave.
What I have learned is that good tenants on M2M leases will be much more forthcoming, than a tennat on term, when they are contemplating moving. I get plenty of notice and rarely experience a vacancy. New tenants are usually found before the old tenants leave. When breaking a lease tenants rarely give any notice. If they leave at the end of their term lease it would be no different that leaving on a M2M lease cost wise for a landlord. The length of a tenants lease rarely has any bearing.
Additionally, when screening, a bad tennat will usually not sign a M2M lease knowing they will likely be terminated. This is a additional screening tool.
In my opinion M2M has all the upsides advantages of being in full control of your investment property with no down sides. A tenants life is not governed by a lease.
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
8y
Of course, the downside is that the tenant can leave at any time with only 1 month notice. My opinion is its better to screen well and do a 1 year lease. Especially I'd you have to pay a PM a resetting fee for each new tenant.
Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes
8y
@Maria Luna, a verbal month to month offers you ZERO protection. Why not have a month-to-month rental agreement? That way you can outline that the terms are for tenancy and still not be bound to a long term lease. If you don't have anything in writing, how will you prove the tenant violated the rules?
@Eric James, as for the tenant only giving 30 days to move, a piece of paper isn't going to stop them from leaving if they find they must move. It only makes them legally liable for the rent, which, they are not likely to pay anyway. We all say on here, 90% of the time, it's not worth going after a tenant who has abandoned a property or broken a lease because it costs too much.
Also the cost to evict a m2m tenant is the same as a lease tenant, because if they don't want to leave you still have to pay the same costs to evict them.
Buy and hold Investor · Winter Garden, FL · Member since 2015 · 38 posts · 13 votes
8y
@Maria Luna I would stay far from doing month to month as much possible. Try setting up a good screening system for your tenant and get them on a 1yrd lease. The month to month doesn't really give you, the owner much protection or any.
@Maria Luna, a verbal month to month offers you ZERO protection. Why not have a month-to-month rental agreement? That way you can outline that the terms are for tenancy and still not be bound to a long term lease. If you don't have anything in writing, how will you prove the tenant violated the rules?
@Eric James, as for the tenant only giving 30 days to move, a piece of paper isn't going to stop them from leaving if they find they must move. It only makes them legally liable for the rent, which, they are not likely to pay anyway.
It will stop better, more responsible tenants.
When managing my own property I didnt much mind tenants breaking their lease. The security deposit they forfeited was basically a months rent, during which time I could get the place rented again. I wouldn' have gotten anything if they had been M2M. I understand their are downsides of LT leases, but I prefer them.
Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes
8y
@Eric James, you can collect a security deposit on a m2m rental. They still need 30 days and if they move out without the 30 days, you keep the deposit!
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
8y
There are pros and cons to each. I prefer long-term leases, preferably 2-year, and I screen my tenants well. Being a renter, myself, for several years, I would not even consider month-to-month as I do not want the potential for moving expenses, rent increases, etc., if landlord decides to change the terms 2-3 months in. If someone wants a month-to-month lease, I would raise the rent significantly and treat it as a short-term rental. As a landlord, I prefer minimum 1-year lease as I don't want turnovers, and I renew it with full-year renewals, not defaulting to month-to-month, as I do not like winter turnovers.
@Eric James, you can collect a security deposit on a m2m rental. They still need 30 days and if they move out without the 30 days, you keep the deposit!
Scenario; tenant on M2M gives 30 day notice. They then move out, my unit is vacant for 1 month, and I lose 1 month of rent.
A tenant on a LT lease would forfeit the deposit for moving out, so I would be out very little money for the turnover (if self managing).
However, if using a PM who would charge a 1 month rent fee for resigning a tenant to a 1 year lease, I would prefer to let the tenant automatically roll over to M2M to avoid that fee.
Yes, I am having the tenant sign a month to month rental agreement that my lawyer prepared for me. I’m also charging the tenan $1000 security deposit, and if they want to move out they have to give me a writing notice within the first five days of the month prior to moving out, if they don’t give me the appropiate notice then I keep their deposit. She put it all in the rental agreement.
I am a major supporter of the value in M2M leases. I thoroughly screen all applicants as every landlord should do regardless of lease choice. All my tenants are on M2M from day one.
Landlords are turning their investment property over to total strangers that have no inherent commitment to their landlord regardless of a lease. When they need or choose to leave they will leave.
What I have learned is that good tenants on M2M leases will be much more forthcoming, than a tennat on term, when they are contemplating moving. I get plenty of notice and rarely experience a vacancy. New tenants are usually found before the old tenants leave. When breaking a lease tenants rarely give any notice. If they leave at the end of their term lease it would be no different that leaving on a M2M lease cost wise for a landlord. The length of a tenants lease rarely has any bearing.
Additionally, when screening, a bad tennat will usually not sign a M2M lease knowing they will likely be terminated. This is a additional screening tool.
In my opinion M2M has all the upsides advantages of being in full control of your investment property with no down sides. A tenants life is not governed by a lease.
Investor · Redondo Beach, CA · Member since 2017 · 34 posts · 17 votes
8y
We started doing M2M leases (our RE attorney recommended) assuming no rent control ordinance because it's easier to deal with a tenant from hell. And you will get one of those eventually. If your tenant can't or don't want to pay (professionals) nor move out, that fixed term lease won't do much to protect the landlord.
Property Manager · Grand Rapids, MI · Member since 2018 · 97 posts · 80 votes
8y
As a PM, I have done both year long lease agreements and M2M tenancies. I typically do year long leases so that I can end the lease in a month that I know I can get the highest rental amount possible. For example, most of my leases go from August 1st to July 25th. Leaving it M2M, you risk someone moving out (even with a proper notice) anywhere from October to March, which can be tough months to find a new tenant to move in at full price. Good luck!
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
8y
@Maria Luna Without a doubt, do a long-term contract. We do at least a 12-month contract.
The rationale behind this process is that this gives us a good cash flow for a long period of time before having to find and place another tenant, a process which can be costly and time-consuming in some markets.
Of course, you get a good tenant from a great tenant screening process. Check out Cozy, the site has a good credit check and background check process, which the tenants pay for.
Hope this helps. Goodluck on your first tenant placement. Thanks! - Ola
"this gives us a good cash flow for a long period"
Except for the fact that any experienced landlord knows that the length of a lease has no bearing on how long a tennat will stay. Term or M2M they will leave at exactly the same point in time. It's called "life".
Those that believe a term will prevent tenants from leaving during winter or hard to rent months do not understand the business or their tenants.
There is zero guaranteed upside to a term lease and you give up being able to control your property or your tenants. M2M on the other hand provides real control as opposed to having faith in tenants.
Investor · Buffalo, NY · Member since 2016 · 74 posts · 29 votes
8y
Brandon Turner wrote a really helpful book called "The Book on Managing Rental Properties."
Here is an excerpt from that book that may help your answer your question.
Your two choices when it comes to a lease are “term” and “month- to-month.”
In a term lease, the tenant is required to stay for a certain
length of time. This term is usually one year in length, but some leases are signed for six months or nine months.
With a month-to-month rental agreement, the tenant is not
required to stay for any length of time, but proper notice (as defined by state-law) must be given before they move out.
It might seem obvious to use a term lease when renting to a tenant, but there is one major disadvantage to doing this: The landlord is also locked in to the lease. If you as the landlord don’t like the tenant, you have to wait until the end of the lease to get rid of them. With a month-to-month tenancy, you can simply give the tenant proper notice (as defined by your state) that you will not be renewing their month-to-month lease anymore, and the tenant has to move. This is a BIG stick to carry around and ensure your tenants are behaving, especially if you are new to landlording.
Rental Property Investor · Gulf Breeze, FL · Member since 2014 · 1k+ posts · 733 votes
8y
I don’t want to go against what your lawyer stated @Maria Luna, but also talk to your lending institutions and find out their requirements as some may require long-term leases to count the rental income against your DTI , which may / may not disqualify you from obtaining additional loans. I'm also an advocate of having a professional property manager in place. They have more experience on tenant screening and dealing with bad tenants if one slips by their filters.