Mth/Mth or yearly lease?

Question

During this hectic time we call "The new normal" do you guys recommend month to month or yearly leases, assuming there new tenants?

Peter M. · Answer

@Joshua Loranger Depends on the situation really. I have m2m, 1 yr, 2 yr and everything in between. Like @Nathan G.i have provisions in my lease that incentivize tenants to not leave early. And remember, a lot of PM companies charge a fee to resign a tenant which is why owners want longer leases in addition to less turnover. But if you self manage you can do what is in your best interest.

Aaron W. · Answer

@Joshua Loranger Is your potential tenant paying market rent?  Can you find qualified tenants with annual leases?

The longer you can keep a tenant, the more stability you will have and the less potential turnover costs needed. Some of the highest costs in the rental can be in turnover.  Even if they aren't quite at market rate, it may be good to keep a tenant that is allowing the property to cash flow.

On the flip side, on a month-to-month lease, there is more flexibility for you and the tenant. You can increase rents as needed; however, there is always the chance the tenant moves out at the end of the month which will can increase turnover and vacancy costs.

Best of luck!

Theresa Harris · Answer

Either way, what are the chances you can get rid of them if they are a problem with the eviction ban in the US?  I'd do a one year lease.

Aj Parikh · Answer

@Joshua Loranger Tenants also like security so I would not go for a month to month. If anything, I would lower the rent and get the lease signed

Cody Benedetto · Answer

@Joshua Loranger I’m always annual, would only go month to month if I was struggling with vacancy and found a great tenant who would only sign mtm

Nathan Gesner · Answer

It depends on your market. Some markets were difficult to evict tenants prior to CDC's illegal moratorium, so it makes sense to stick with M2M and make it easier to get rid of tenants. On the other hand, if a tenant refuses to leave, there's nothing you can do about it right now so it doesn't make a difference.

I'm in a more reasonable state where courts still evict people for failing to pay rent. So I stick with a one-year lease and have figured out a way to monetize people that leave early.

Know your market and adjust accordingly.

Mth/Mth or yearly lease?

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