Month to month lease

Rental Property Investor · NH · Member since 2023 · 444 posts · 419 votes

Hey there! Personally, I like year or 2 year commitments with a 3% (5% if they lock in for 2 years) raise in rent built in each year. Month-Month leases are 100-200 dollars more expensive per month than year long commitment to cover the risks.

[email protected]603-833-0951

Andrew Bosco - Candor Investment Group529 Reviews

Website View Page

1 Reply

Josie Brown

Detroit, MI · Member since 2022 · 118 posts · 49 votes

3y

Hey Isaac! You may want to consider using a property management company even if it is just to place the tenant. They should have a solid screening process and they may even be able to share data to show their success with placing tenants.

As for the options you are considering in regards to a lease, both have their pros and cons as you have mentioned. Keep in mind though that a month-to-month lease would also allow for a tenant to move out at basically any point (after two months, three months, etc.). This means you'll have to turn the property again, market it again, and screen tenants again, which all typically come with some sort of cost. The frequency of this process could definitely occur more often with a month-to-month lease versus a one-year lease.

3 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

3y

@Isaac White how much research have you done on the differences between a MTM or 12-month lease when evicting a tenant for nonpayment, damages, etc?

[email protected]248-209-6824

Logical Property Management4.9460 Reviews

Website View Page

0 Reply

Steven Goldman

Lender · PA · Member since 2019 · 535 posts · 461 votes

3y

Good Morning: First, Drew is suggesting that there may be no difference under the law where the property is located between a month to month or annual lease. Second, if you decide to refinance you will need a annual lease. Most banks and hard money lenders will not refinance your property if it is subject to a month to month.

Finally, turnover equals cost to repair so I would seek a long term tenant. Good luck and keep moving forward.

2 Reply

Account Closed

Realtor · Colorado Springs, CO · Member since 2022 · 4 posts · 4 votes

3y

I think all the feedback you are getting are great points for you to consider before making a decision:

I would check your city or county regulations on month to month leases. Some places could consider that a STR.

Most cities have peak rent cycles so I would look into the vacancy rates for each month. Before you decided to go this route.

You can also do a shorter term lease like 3-6 months. Most short term lease have a premium 20-25%. See what apartment complexes in your area are doing to help set your premium. You can call the apartment complexes or see their information on line.

I would also look into how much time this type of lease could cost you. Time is money!!

It looks like you are in Madison, WI. How close are you to the university? You could rent out rooms to university students and get higher return on your investment. Here in Colorado Springs, students can pay between $600 -$1000 per room per month.

1 Reply

Ryan ThomsonBusiness Member

Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes

3y

Quote from @Isaac White:

I have finished the rehab on one of the units in the duplex I own and I’m getting ready to rent it out. I started thinking about how I wanted to structure my lease agreement with my tenants.

Option 1: lock the tenant into a year lease

Option 2: month to month lease

My first instinct was to go the typical route and do a year long lease. After thinking about the two options a little more I believe the month to month option would benefit me more.

Here’s my thought process:

- This property is my first experience being a landlord, so I don’t have experience screening and choosing tenants. A month to month lease allows me the option of not renewing the lease if the tenant decides not to pay rent, trash the place, etc. without having to go through a long eviction process.

- Flexibility to adjust rents with market conditions more frequently.

- Once I find a quality tenant on month to month lease terms, discuss the possibility of signing an annual lease agreement.

Let me know any thoughts you have on my plan or advice about structuring lease agreements.

I like the month to month idea to start. That is usually what I do for the exact reasons you mentioned. Weirdly enough though the people I keep on month to month have stayed the longest. I think there is something about feeling like "I could always find another place" that makes tenants not spend the energy to find a new place. Just a theory I'm working with.

The Assumable Guy544 Reviews

Website View Page

1 Reply

Lauren Stark

Real Estate Agent · Madison, WI · Member since 2021 · 60 posts · 33 votes

3y

Hey Isaac, I'm an investor and agent here in Madison, WI. Madison hospital systems and tech companies provide a great setting for investors doing MTRs (month to month rentals). I have seen investors and clients have success with this in my area. I'll shoot you a DM in case you have more questions. Happy to chat!

1 Reply

Laura Stayton

Property Manager · DE · Member since 2023 · 248 posts · 133 votes

3y

As someone who has managed rental homes for many years I would recommend you opt for a 1 year lease and screen heavily on the front end (if you don't know how to screen with credit, criminal, etc use a free site for landlords like worryfreetenant.com ) You will also need to contact current landlord, verify income etc. If you aren't comfortable doing this yourself, highly recommend you hire someone to do it for you. It will cost you less to pay a property management company to do this for you than it will if your tenant gives notice to move after a few months and you have to prep the home again and look for a new tenant (which means probably vacancy time) etc.

A tenant will likely give notice to move in a month to month lease if you try to raise rent too frequently anyway. To maximize income and profit you do better to screen heavily and get qualified tenants at market rent and take care of them so they want to stay for years if possible. The more turnover you have, the more wear and tear on the home, the more months without rent....

1 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

3y

@Steven Goldman a well written lease will have zero difference between MTM & Annual lease evictions:)

@Isaac White there may be other reasons that affect your decision, but evictions should not be one of them.

[email protected]248-209-6824

Logical Property Management4.9460 Reviews

Website View Page

1 Reply

Isaac White

OP

Member since 2020 · 17 posts · 6 votes

3y

Quote from @Steven Goldman:

Good Morning: First, Drew is suggesting that there may be no difference under the law where the property is located between a month to month or annual lease. Second, if you decide to refinance you will need a annual lease. Most banks and hard money lenders will not refinance your property if it is subject to a month to month.

Finally, turnover equals cost to repair so I would seek a long term tenant. Good luck and keep moving forward.

I have a lot of built-up equity in this property and will need to refinance at some point. Thank you for pointing this out!

0 Reply

Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

3y

@Isaac White Dane county is to my knowledge the strictest in Wisconsin and has some special stipulations around protected classes and other things you need to know!

Here is a link to the municipal oridnances: https://library.municode.com/w...

More important than the length of lease is the actual form; a lot of leases I see have language in them that makes them unenforceable, because they violate state law. We use the lease forms and contracts from Wisconsin Legal Blank, they are inexpensive and you can order online. Make sure you get at least the small landlord package which includes other forms you have to sign like a lead addendum (mandatory, state law)

When you sign a lease, make sure it is for is for 365 days and not 366 days (like May 1st to May 1st) which makes it a more than 1 year lease and now you have a lot of additional protections for the tenant, for example you are prohibited to use a 5 day notice, you have to use a 30 day. Easy mistake to make.

I get what you are trying to do with the mtm, but once you have a bad tenant in the damage is already done. A well written lease allows you to enforce rule violations. I would focus more on your screening process than - take a look at Mike Butler's Landlording on Autopilot. Great book.

2 Reply

Jon A.

Asheville, NC · Member since 2017 · 385 posts · 274 votes

3y

I only offer month to month leases in my rentals. I don't have many but have been a landlord for about 15 years. Where I live, in NC, there is absolutley no benefit to the landlord having a lease any longer. You are not locking them in, they are locking you in.

2 Reply

Isaac White

OP

Member since 2020 · 17 posts · 6 votes

3y

Quote from @Marcus Auerbach:

@Isaac White Dane county is to my knowledge the strictest in Wisconsin and has some special stipulations around protected classes and other things you need to know!

Here is a link to the municipal oridnances: https://library.municode.com/w...

More important than the length of lease is the actual form; a lot of leases I see have language in them that makes them unenforceable, because they violate state law. We use the lease forms and contracts from Wisconsin Legal Blank, they are inexpensive and you can order online. Make sure you get at least the small landlord package which includes other forms you have to sign like a lead addendum (mandatory, state law)

When you sign a lease, make sure it is for is for 365 days and not 366 days (like May 1st to May 1st) which makes it a more than 1 year lease and now you have a lot of additional protections for the tenant, for example you are prohibited to use a 5 day notice, you have to use a 30 day. Easy mistake to make.

I get what you are trying to do with the mtm, but once you have a bad tenant in the damage is already done. A well written lease allows you to enforce rule violations. I would focus more on your screening process than - take a look at Mike Butler's Landlording on Autopilot. Great book.

You make some great points and I appreciate the resources you've referenced. I've come to the conclusion after reading all these great responses that I should focus my energy on getting a well written enforceable lease and do my due diligence on the screening process, rather than try to cover myself with a month to month lease.

0 Reply

Isaac White

OP

Member since 2020 · 17 posts · 6 votes

3y

Quote from @Jon A.:

I only offer month to month leases in my rentals. I don't have many but have been a landlord for about 15 years. Where I live, in NC, there is absolutley no benefit to the landlord having a lease any longer. You are not locking them in, they are locking you in.

This is exactly what I heard from a local landlord in my area, which is what triggered me writing this post.

Do you have any examples or real life experiences that you could reference where a month to month lease would be beneficial?

0 Reply

Jon A.

Asheville, NC · Member since 2017 · 385 posts · 274 votes

3y

Quote from @Isaac White:

Quote from @Jon A.:

I only offer month to month leases in my rentals. I don't have many but have been a landlord for about 15 years. Where I live, in NC, there is absolutley no benefit to the landlord having a lease any longer. You are not locking them in, they are locking you in.

This is exactly what I heard from a local landlord in my area, which is what triggered me writing this post.

Do you have any examples or real life experiences that you could reference where a month to month lease would be beneficial?

This is the way that I see it. If either party is not comfortable or not performing according to the lease, either party may terminate the lease with the appropriate written notice. If there is a longer term lease in place, either party can become irresponsible or irrational yet the lease binds them together and makes them perform. Maybe the tenant doesn't like the neighborhood or the neighbor themselves and calls the landlord constantly to solve the neighbor problem. People can be very finicky. I can think of several possible scenerios. Unauthorized pets, family members, off street parking issues, etc. Sometimes people just don't like the house after they move in. Can't fit their king size bed in the bedroom or the closets are too small. Utility bill is too high. Floor creaks or they really wish they had a dishwasher in an upstairs unit. The list goes on and on. People make sacrifices on both sides of the equation and sometimes come to regret it. I could give you some real life examples but you can read on any landlord forum and find them for yourself. You really need to understand your states landlord/tenant laws and what rights each party has in the contract. If the tenant pays on time and is respectful to me and the property they can stay as long as they want. I have had tenants for 7 years on a month to month lease. I currently have some for going on 4 years on a month to month lease. I don't have any reason to ask them to leave if they perform according to our month to month contract.

1 Reply

Peter Falk

Real Estate Broker · Madison, WI · Member since 2015 · 118 posts · 60 votes

3y

Hi Isaac,

I guess one mo. to mo. risk is that either party can end the lease with proper notice, so you'd run the risk of a tenant deciding to relocate at an inopportune time (slower Fall or Winter) and could find people relocating and looking to buy a house and move out, so be there more temporarily (with more turn over cost, etc). You could look into rent comps, but would think a tenant wanting move out flexibility would be willing to pay a higher/premium rent for that flexibility.

With Madison/Dane County rentals are in strong demand, especially if somewhat affordable am sure you'll get lots of interest.

1 Reply

Calvin OzanickBusiness Member

Property Manager · Janesville, WI · Member since 2017 · 708 posts · 297 votes

3y

Hi there,

I highly recommend month to month leasing. It offers you the ultimate flexibility. We work in both Rock and Dane counties and use 90% month to month leasing. The term of the lease matters far less than the relationship and the quality standards you abide. We have almost never had a tenant leave for an apartment simply because of the lease term. Some of our longest term and best tenants are on month to month leases. This speaks to us working with great owners who offer quality housing options for tenants at the right price points! Best of luck on your first lease there, and I would be more than happy to chat if you wanted help vetting applicants!

Wisconsin Property Managers4.7416 Reviews

Website View Page

2 Reply

Calvin OzanickBusiness Member

Property Manager · Janesville, WI · Member since 2017 · 708 posts · 297 votes

3y

Quote from @Marcus Auerbach:

@Isaac White Dane county is to my knowledge the strictest in Wisconsin and has some special stipulations around protected classes and other things you need to know!

Here is a link to the municipal oridnances: https://library.municode.com/w...

More important than the length of lease is the actual form; a lot of leases I see have language in them that makes them unenforceable, because they violate state law. We use the lease forms and contracts from Wisconsin Legal Blank, they are inexpensive and you can order online. Make sure you get at least the small landlord package which includes other forms you have to sign like a lead addendum (mandatory, state law)

When you sign a lease, make sure it is for is for 365 days and not 366 days (like May 1st to May 1st) which makes it a more than 1 year lease and now you have a lot of additional protections for the tenant, for example you are prohibited to use a 5 day notice, you have to use a 30 day. Easy mistake to make.

I get what you are trying to do with the mtm, but once you have a bad tenant in the damage is already done. A well written lease allows you to enforce rule violations. I would focus more on your screening process than - take a look at Mike Butler's Landlording on Autopilot. Great book.

This is awesome information. Some of our clients have come to us with the horror stories of accidentally signing a 366+ day lease for the ease of doing less paperwork.

I 100% agree that your screening process is the most important part. You could sign a bad tenant to a 1 month lease and have just as many problems. I think the month to month protections give you an out in case of less physically damaging persons, but maybe just more difficult to work with people who you do not see as good fits after working with them.

Wisconsin Property Managers4.7416 Reviews

Website View Page

1 Reply

Courtney Walker

Investor · San Antonio, TX · Member since 2017 · 31 posts · 33 votes

3y

All my leases are month-to-month. I recalculate rents once a year after calculating for property tax and insurance cost adjustments as well as market fluctuations. Tenants are going to move rather they have a year lease or month-to-month. Do proper screening, maintain a good quality product and most of the time you won’t have issues. No system is 100% fail proof but at least with month-to-month the advantage is with the property manager…my two cents.

1 Reply

Month to month lease

Month to month lease

Most Popular Reply

19 Replies