Month to month or Year lease?

[Gustavo Mendoza]

Hi everybody. I have a 3bd 2bh househack in Merced, CA. I went through Zillow to list the property and do all the screening. A prospect asked me if i was doing a month to month, or lease. What are the pros and cons of going through a year lease vs month to month? What do you guys consider to be a better option? Thanks in advance for your cooperation? 

[Shervin Golgiri]

Hi Gustavo, it really varries for each person. It depends on what work best for you. 

I personally prefer year lease, for me it makes it easier to manage, Less to deal with. Take your time to place the right tenant, Ideally low maintenance and easy to deal with. 90% of you problem could be avoided by proper screening.

[Dan H.]

How many units as my answer depends on the number of units.  

If ab1482 applies then have a lease that terminates in spring or early summer.  When it is up, extend in 1 year increments.  This is because the LL has few options to terminate a lease that might as well restrict when tenant can leave without having to cover vacancy. 

 If ab2482 does not apply, then 6 month lease (so the tenant is not treating it as real short), then have it go month to month until one of you wants to give notice. This is because tenant really can break lease easier than LL, so might as well not have the lease to balance the power as it relates to lease termination   

When does AB1482 apply:

- is SFR then AB1482 does not apply

- if triplex then AB1482 applies.  
- if a duplex, ab1482 does not apply if owner occupies a unit longer than the tenant, otherwise it does apply. 

Good luck

[Anthony Swain]

@Gustavo Mendoza

Month to month can work, but depending on the tenant, this can lead to more turnover for you. A year lease will give you more stability and less management throughtout the year. 

However, if you plan to do a furnished rental, then I think month-to-month may be more common. The travelers might only stay a short period of time and only stay for a few months. This message might have more property management, but possibly more income.

For example, I have a duplex house hack in Charlotte. We have the other side as furnished rental to do "MTRs". I'd be open to a month to month lease, but I'd still have them go through same screening, same deposit process, and same rules as other tenants. This benefits me, because I'll still collect the rental payment and have the ability to evaluate the tenant before anything more long term is signed. If it is a good fit for both of us, then we can always extend during their stay. 

I hope this helps! Feel free to reach out.

[Drew Sygit]

@Gustavo Mendoza it really depends on the tenant and state/local laws.

Class A tenants, usually having 680+ credit scores, can be held accountable for a 12 month lease.

Most Class B tenants, 620-680 scores, can also.

With Class C tenants, under 620 scores, many won't care if a lease is 12 months or MTM, they will move when they please. So, many landlords go MTM with these types of tenants to make it easier to get rid of them.

State & local laws also come into play with their Notice and evictio requirements.

[Gustavo Mendoza]

Yeah. It's furnished right now. Do you guys list the rooms for the same price whether it's month to month or a year lease?

[Jeremy Blackburn]

No, month to month pricing should be at a premium for the shorter term flexibility.