You don't know if you like them, yet. Why would you tie yourself up to a 12-month? This way, they don't perform, you give a notice and bam -done. No evictions.
Once you know them and trust them, think about putting them on a lease.
As long as you are in a good location month to month. It's far easier and less expensive to find new tenants than to get rid of bad ones. Evicting someone is time consuming and expensive, during which time your cash flow will cease.
@Brian Dickerson in almost 28 years I have only done month-to-month (currently 85 doors). Not that one is right or wrong, but remember a lease protects the tenant as much as you. If you want to remove a tenant on a lease you will need to prove a violation of the lease that rises to the level of eviction ... in the eyes of a judge. Non-payment is usually acceptable, but what about the irritating, constant minor violations, or unproven issues you don’t want to go to court over? A simple 20 day (or 30 or 60 day depending on your jurisdiction) and everyone moves on.
Or..., when the government decides to jack your property taxes 20-30% mid lease, how do you cover the increase? (Just ask Seattle) As a month to month landlord I can adjust as necessary.
My experience is that people stay about the same under either arrangement. I have roughly 30% that stay less than 2 years, 30% 2-5 years, and 30% over 5.
I agree with the others: keep them on a month-to-month until they've proven themselves then try to lock them in for a longer term.
To clarify, you are all speaking of month-to-month leases for a fixed term (of say, 1 year) or something else?
I wouldn't make that decision yet, ride it out for a few months and decide if you want those tenants for another 12 months. If you do, propose a new 12 month lease or remain MTM with an additional premium added to the rent. If you don't like them, you can easily give 30 day notice to move and start over.
@Cathie Kovacs a month-to-month is a lease that is only good for 30 days at a time with an automatic renewal until either party serves the other with a 30-day notice. There's no such thing as a month-to-month lease for one year.