MTM rent rate is there a premium over a yearly lease rent rate?

Question

For those who are doing MTM leases, do you charge a premium over the yearly lease rent rate?  If so by what percentage?

My neighborhood is for the most part rentals are leased yearly.

I am near the end of a lease term with a tenant and am considering either a new yearly lease or switch to MTM.

If I renew a yearly lease I was not planning on raising the rent, but switch to MTM I am not sure.

Marcia Maynard · Answer

We charge the same monthly rate, whether on a lease or MTM agreement. We also charge a move-in fee (administrative), because there are extra costs and time involved in getting a new tenant moved in.

We prefer MTM because it allows us greater flexibility if we want to force a move out for non-performance or if we want the property vacant for some other reason. We can then serve a 20-day "no cause" notice which can not be contested. Which is a fortunate thing about the landlord-tenant laws in our jurisdiction.

We've thought about charging more for a tenant to be on a MTM agreement, but haven't.  I think the market would allow it, because some tenants don't want to lock themselves into a time frame set by the landlord, and might pay a premium for that.

Most of our tenants stay long term regardless. Those who stay short term usually don't plan to stay short term, it's just that circumstances change for them and they move. They would move on their own time frame whether or not we had a lease, so the MTM just makes it easier for all us.

Jeff B. · Answer

The key numbers that I look at are NOI or ROI and the operating expenses percentage.  The next is the amount of rent I can charge to minimize vacancies.  I am also fortunate to have a bunch of tenants who treat my rental as their home.

Then since the Real Estate Assessor in Palm Beach County sends the 2014 property tax bill towards the end of the year I check the home sale prices to get an average price andpercentage of increase.  Next go to the Tax Collector's office and gauge the percentage of increase.

On a Month to Month I always send them an informative letter on how I appreciate their business, why the rent is being increased, and comparative rates from similar properties showing what a value mine is and that with all the hassles of moving it doesn't make since to go anywhere else nearby.

I have already sent out my rent increase notices since the latest sales prices that the Real Estate Assessor is going to use for next year is projected to increase.

Elizabeth Colegrove · Answer

I have a definite moving season so I have month to month lease ata $300 increase. Personally I don't want m-to-m leases by this way the offer still exists.

Ursula B. · Answer

Our month-to-month rate usually runs at about a $100 premium.  I had one tenant opt for month-to-month for a $105/month premium rather than sign another 12-month lease at no rate change.  He stayed for exactly 12 additional months.

Sam Leon · Answer

No, single professional renting a 2/1 good credit score, rent via a realtor in the MLS so he has to pay 1 month rent as commission.

$1200 is about right.  I was asking $1100 last year in late December and it was dead for a few weeks, finally mid January I got a flood of applicants.  One was a college student with a parent cosigner...willing to pay all 12 months lump sum at asking. then the current tenant came along and she wanted to sign a two year lease at $1000, my fault, I agreed, but then thought, hey, why 2 years, there is no benefit to me, the same fee to break a lease 1 year vs 2 years, so I did the 1 year lease but honored the $1000 since I had agreed to it.  So now I am below market.

Bryan N. · Answer

But... did that landlord take a high risk tenant to get that lease???

Sam Leon · Answer

Well I got a comp.

Four unit building, unit right next door, less updated, closer to street, just rented for $1200 on a one year lease.

Current lease expires Jan 31, 2015, tenant paying $1000.

Decisions decisions.

Bryan N. · Answer

My lease defaults to MTM with an 8% increase.  If they renew the lease their is no increase. Not works two ways.  It's a premium for flexibility of MTM and an incentive to renew the lease.

Andy Collins · Answer

After the initial lease term my contracts automatically go to month to month until someone gives 30 day notice (actually it is notice for the agreement to end at the end of the following month).

I have never charged any additional fee for the month to month, because frankly I haven't ask them to sign a new agreement,,if I ask them to and they wanted to go month to month, I would probable charge a premium

MTM rent rate is there a premium over a yearly lease rent rate?

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