What's your favorite type of lease?

Question

For a long time I was on the 1 year lease train. Be patient, find a good tenant and then lock them in for a year. I've had success with this for my first 10 rentals or so in Columbus OH. However, my most recent lease I wish there wasn't that year in place..

Recently I've been talking with some old school guys, whom I love learning from, and they are big advocates of starting off leases month to month. And I quote "this gives me time to see if I like dealing with them and for them to see if they like dealing with me."

I think my game plan will now be to get tenants in place on a month to month lease. Inspect the unit after about 6 months or so and if they pay on time and property looks good THEN maybe lock in a year lease.

What are your thoughts BP? Do some people approach renting this way? I know I have some clients that love 2 year leases. Maybe some people have some success with this route too?

Jonathan Styer · Answer

I always look at the time of the year to determine the length of lease. If we are heading into winter I prefer to do like a one and half year lease to line up the end of the lease with the warmer months. Never have started off month to month, I have heard of people doing that but it makes me nervous.

Bjorn Ahlblad · Answer

I like MTM with first, last and the security deposit up front-makes for a respectful tenant.

Calvin Watkins · Answer

I think this would depend greatly on the type of location you have and the tenant type it would attract.

If you are in an apartment type scenario a MTM to start seems like a great plan to weed out possible troublemakers.

I rent SFMs with the standard 3x2 model or 4x2. This appeals more to starter families or friends who intend to go to school or have the same job for quite some time. With that being the case I like 2 year leases as it lowers turnover costs and you get really high quality tenants in your location for a good amount of time.

Side note all of my units are "tenant proofed" with vinyl planking and tile. With the depreciation on those types of upgrades I felt it better to go with longer term leases that also allow me to update some stuff during the tenant's stay. I just replaced a roof on one while they were there and will likely get it repainted (exterior) as well. This allows them to see that you are working to make the place better while they are there which I feel increases tenant retention.

I hope this helps!

Scott M. · Answer

MTM is the favorite, period.

Marc Rice · Answer

I've heard a few of the older guys who manage in more C class areas do that. It seems like it could be a better safety net, but also requires some more time. Some owners say they want to inspect the current living situation of the prospective tenant that same day they inquire on the property so the tenant doesn't have time to tidy up. If the tenant is gross in their current living situation, then the owner won't rent to that tenant

Austin Steed · Answer

@Bjorn Ahlblad

Agreed. Depending on credit I’ll ask for first and last months rent.

Austin Steed · Answer

@Jonathan Styer

Makes sense to me. Yeah I’ve noticed from my rentals time of year makes a huge difference.

What's your favorite type of lease?

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