Rental Property Investor · Nashville, TN · Member since 2019 · 58 posts · 11 votes
I am looking at buying my first rental property either this spring or this summer. I am looking at purchasing a run down home and BRRRR'ing it into a B class property. I talked to my lawyer and he said with a lower income type property that it is better to renew the lease in 3 or 6 month intervals so that I have to option to terminate the lease rather than find grounds to go through and eviction if the tenant is not following the lease or paying rent. He said he recommends his clients with A class properties to get their tenants into a year or two lease because these tenants are statistically more trustworthy, but a B or C class property statistically house tenants who have more problems. I see his point but if I do my due diligence in the application and screening process should I still only keep a lease for 3 or 6 months. Is it that big of a deal to renew a lease every 3 or 6 months (I will be self managing the property)? I would just like to hear other's opinions on this subject. Thanks
@Colin Spivey determine what the custom is for your area. What your lawyer said is interesting; but getting in step is more important. Also become familiar with market rents. Do your own research. If practical don't end leases in the dead of winter if y'all get winter where you are. My properties are all pretty much B and all my tenants are MTM; as is customary for the area. All the best!
@Colin Spivey determine what the custom is for your area. What your lawyer said is interesting; but getting in step is more important. Also become familiar with market rents. Do your own research. If practical don't end leases in the dead of winter if y'all get winter where you are. My properties are all pretty much B and all my tenants are MTM; as is customary for the area. All the best!
Normally I’d say month to month ...however when you go to brrr the bank will want to see those leases they will want one year leases not 30 day ones to them a year lease represents financial security . Better call up your lenders and see what they expect going forward so you don’t run into surprises
Really? 3-6 months on Class B rentals? I think you will find that most SFR rental owners around here own Class C/B properties, and 1-year lease terms are pretty standard.
Is it in a bad neighborhood? Maybe its really not a Class B neighborhood if you’re attorney is afraid of such problems?.
I have Class B properties in Memphis and I get 1-2 year leases, with no problems. Screen your tenants well. There’s plenty of good information and education on BiggerPockets about screening potential tenants.
Tenant turnover costs you money, and you don’t want to have to deal with that every 3-6 months.
You should ask a few Property Managers in your area what they recommend.
Plus, I agree with @Dennis M. in that Lenders will want to see longer leases in place.
In B class vegas I give a $25/mo discount for 2 years and charge $50/mo more for MTM after the first year only, no MTM at the start. Turnover, vacancy and make ready, avoid all 3 if at all possible.
It is not a bad neighborhood. It is a more rural road but only two miles from the interstate and the nearby town. Many of the neighboring properties are A class properties with a few B’s around. It is only a potential property I am looking at right now, but my lawyer recommended 3 or 6 month leases for the sake of if I had a bad tenant I could terminate the lease instead of renewing thus preventing an eviction. I am thinking I will reach out to a property manager and get some advice there too. Thank you
@Colin Spivey. I would never turn down a 12 month lease to do a 3-6 month. If you screen the tenant properly and get a deposit why would you do a three month lease. I could see a 6 month lease if i was not getting response. If you are going to do three months you should furnish the unit and look for traveling professionals. Thee is a niche for that