Is the rent for M2M higher than Y2Y?

Question

My tenant asked to go M2M since she may be moving to a different area in town, unsure when. Current Lear lease is up in 2 mo.

What is the customary rental fee when you go to month-to-month?

Also, I believe in FL you need to receive a 15-day notice, is that right?

Andy D. · Answer

Federico L. That sounds a bit on the low end, especially as you would have increased it to this amount for a new year's lease anyway. The increased amount is justified by the additional - albeit only: potential - increased turnover and its associated costs. You described some of it already.

In any case, your lease should state what happens when the (annual) lease term is over and all parties agree that tenant can stay. My lease states that it then automatically becomes a m2m with an increase of X in rent starting with the first month of the m2m agreement. If you do not have such a clause in your lease, you need to have tenant sign a new lease stating it's m2m and in which you stipulate the (increased) monthly rent amount. In your case I'd probably have raised it to $1750, though, but as I stated above that's all dependent on the individual circumstances and obviously your choice since you're the boss. ;-)

Colleen F. · Answer

Thomas S.  Not correct that >>> In  all cases when a term lease comes to a end the lease automatically becomes M2M and most landlords will leave it that way without raising the rate.

If depends on what  your lease says, if it says it renews for the same term and it is a year lease it renews for a year.  I have some that terminate with a higher weekly rent if there is not a  renewal.  You have to structure it right for your area.

I would say to the OP that if you are ok with M2M look at if there is a premium charge for that in your area. How much more depends on the area.  Here a M2M in the summer would come at a premium.  In FL it may be a premium in winter.   Since this is an existing tenant and she has indicated the intention to leave I would not even consider letting her sign a year lease now.

Andy D. · Answer

@Aaron T. OP's situation is that a 12 month lease ended. As Thomas S. pointed out, that (usually) warrants an increase in rent simply because 1 year has passed and rent should be adjusted because of this. It coincides with the lease becoming m2m and therefore the increase can be seen as being based on that rather than a "normal" increase based on time having passed by. Then again, I personally do mix the reasoning together because of the fact that m2m usually causes me more turnover and therefore costs compared to 1 year leases.

I have to admit, though, that so far this is a mixed pool of sorts since my 1 year lease tenants tend to actually leave after this year due to relocation etc while some of my m2m stay even longer than 12 months... So EMWV and I guess it's simply a matter of taste and local market customs. And as for building relationships with tenants: that has nothing to do with the rent amount. And: tenants have no loyalty...

Thomas S. · Answer

IT depends on the landlord. The landlords that want prefer to have tenants on a term leases will raise the M2M rate to encourage them to sign a new term lease. Their false belief is that it controls when tenant will leave. Landlords that take advantage of having tenants on M2M will not charge a higher rate.

In all cases when a term lease comes to a end the lease automatically becomes M2M and most landlords will leave it that way without raising the rate. Aside from the annual rent increase of course.

Aaron T. · Answer

why raise the money for M2M. if your tenant has not been a problem, pays on time, and takes care of your stuff, you still are out nothing. either way you know you have a vacancy/turn over coming. I have done a couple extensions to my leases that go M2M, but my tenants are great, so I never upcharge them. I never saw the point. its all about building those relationships.

Federico L. · Answer

OK @Andy D., totally see your point. Would probably stick with the $1715 since she is already a tentant. I think one charges a bit higher to recoup costs of pain/fixes after a short lease.

Federico L. · Answer

Thanks @Austin Fruechting, I should have posted that. Current rent is at $1695, and the new yearly lease I submitted initially I was raising it to $1715.

Andy D. · Answer

Can't say anything specific about FL but I have 30 days and see numbers such as "10% increase" floating around. Even in my SoCal units I'd have a hard time getting those 10% through. I see no point in enforcing a tenant change (because that's what invariably will happen if one goes too high) if and when I have a perfectly good tenant. Yes, he/she will leave eventually but the longer they stay (while having a fair market rent amount) the better for me. Plus I'm not some blood sucking landlord portraying the stereotype of said bloodsuckers. So in my case I typically go by a fixed amount between $50 and, maybe, $100. Obviously depends on the actual rent amount and everything else (demand!).

Short answer: customary seems to be a rent increase when changing from y2y to m2m. Amount depends on individual situation of property (and possibly tenant).

Austin Fruechting · Answer

Depends on the rental rate.  At a loft I was renting a couple years ago at $1400 a month it tiered.  If I remember correctly I think a 6-month was an additional $50, 3 month $75, and month to month was an additional $100.