Try to renew expiring lease or let it go month-to-month?

Question

My tenant's lease will be up at the end of the summer and I'm debating if I should give them 30 day notice to sign a new lease term, extending the lease another year or two, or allow the lease to enter the month-to-month auto renewals? I have really good tenants and I don't want to lose them which I'm afraid may happen if I ask them to commit to another year or two but I also prefer my leases to begin in the summer when more people are moving. In the past, I've always received more interest in the property than I can even process when it's up for lease so vacancy has been close to 0% but it's always been on the market with an August move in date. I'm wondering how much of an impact there will be if I let them stay a few extra months, and then I'm potentially stuck with listing it in the winter or some other inconvenient time?

Lynn McGeein · Answer

I personally only renew annually, or if a good, long-term tenant, I'll offer a 2-year option. I avoid having to find tenants in winter, especially over the holidays. Seems to be more problematic applicants to deal with at that time of year. If I have to lease in Nov-Feb, I actually make the initial lease term slightly longer than a year so it ends between March and July, and most are appreciative that they don't have to move or find something new during the winter.

Nathan Gesner · Answer

Consider a one-year lease with a clause that says tenants can expect a small increase every year at renewal. This will keep you on schedule. Go to a search engine and search for "consumer price index [year] [state]" and you can use the CPI as a model for how much to increase rent. When I search 2022 for my state, I get 6.1%. So I may bump the rent 5% - 6% to at least keep up with the higher cost of living.

Eliott Elias · Answer

Why would a year lease throw them off? If anything a month to month will make them feel less secure.

Nathan Gesner · Answer

You are over-thinking it. Just because it's harder to rent in the winter doesn't mean it's impossible. I'm in a cold area and we've been renting well. Maybe it takes three weeks instead of one.

Give your tenants the option of staying month-to-month until June, then they have to commit to a one-year lease or vacate so you can find a one-year tenant. Or talk to your Tenants about signing a longer lease, like 15 months, that gets you back into a spring/summer turnover cycle.

Whitney Breedlove · Answer

Thanks so much everyone for the advice! This is definitely helpful and gives me a lot of different options to think about.

I would say they are a little bit below market rent. They’re on a two year lease and rents have gone up during this time but I probably won’t raise their rent since they’ve been good tenants. If I put it back on the market I could probably easily rent it out with a $150 rent increase (if not more.)

Bryan A. Brown · Answer

@Whitney Breedlove

Send them a rent increase notice. Maybe something like 3-5% so they don’t leave. This will keep them under terms of existing lease (except at new rate) and still month to month moving forward. Consult with whoever U need to first. This is simply a suggestion.

John Morgan · Answer

It depends for me. I’m in Texas where there’s a housing shortage so I can find new tenants within 48 hours of listing them for rent on Zillow rental manager. If your area is slow, then I would try and do your leases around May or June. I’m only doing month to month leases for now on. That way I can renew when I want. And boot them out anytime I want for any reason. My good ones only get rent increases every two years. My bad ones get them annually. So none all depend on the tenants and how much money I’ve spent on the house in the last couple years to help recoup my expenses.

John Christodoulakis · Answer

If they are good tenants and it seems like they want to stay then I would lock them into another year long lease. At the very least you can figure out if they will be leaving or not. I have leased in the winter before and not had any problems, but it all depends on your area. If you had success in the summer months then It’s better to find out sooner than later.

Bruce Woodruff · Answer

M2M gives you more flexibility in the event something goes sideways with the tenant....

Try to renew expiring lease or let it go month-to-month?

Try to renew expiring lease or let it go month-to-month?

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