Lease renewal strategy

[Kosh Vokter]

Tenant yearly lease expiring in June. Very good tenants, always pay rent on time, no hassles. they are asking if they could go month to month from July, since they are looking to buy a house and don't want to sign a term renewal contract. I would prefer to retain them as tenants, but also know summer is time of moving and so it might be harder to find new tenants, say if the current tenants were to move out in fall/winter. 

1. Can I ask for say 30? day notice and ask if they would be open to me showing property to new tenants in that 30 day window to reduce vacancy time?

2. Suggest a little higher m-t-m rent, than what it would have been if it was a term renewal.

How have you dealt with such situations in the past? 

[JD Martin]

Your lease should already have a holdover clause (M2M) and a notice clause (30/60 days is common) and a "allowed to show" clause. A good lease will also address holdover rent amounts - 5 or 10% higher is not uncommon, but honestly we just let good tenants roll straight to M2M because then we have the flexibility to raise rent or end the lease with just the 30 day notice whenever it works for us. If you are in a very weak rental market, and getting new tenants in the winter is more difficult, you can either have them resign a one-year lease and have an early termination clause in there (we do 2 months total rent), go higher on the M2M so that you're collecting extra money while they're there, or considering lowering the rent a bit if they leave in winter and make the first lease 6 months (so it renews in summer) or 1.5 years. 

My experience with higher M2M rates is that tenants end up leaving faster. So if you want them to go 1 year and they only want to go M2M, and you raise the rent by 10% based on that, they will probably get on their horse to get a house bought or move into another rental.