Pros and Cons of Offering Month to Month Leases

As a landlord, you know that vacancies should be avoided at all costs. The most commonly used method to avoid vacancies is to have tenants sign annual or 2-year leases. But there may be certain conditions where it’s favorable to landlords to offer month to month leases, too. Here are the pros and cons to consider.

Pros of Offering Month to Month Leases

Can Solve Temporary Vacancy Problems

Offering a month to month lease can solve a temporary vacancy issue. Let’s say your last tenant moved out on the 15th because they asked for a two-week extension on their annual lease. It only took your cleaners a day to put the place back in order, so now you’re looking at two weeks’ vacancy at a minimum because most standard tenants will want to move in on the 1st. But if you offer a month to month lease, you’ll get more candidates that need to move in right away. They’re already unconventional; they may be looking for a house to buy and just need temporary housing, in town temporarily to do migrant work, or to complete some kind of work project.

Gives You Good Reason to Increase Rent Each Month

Tenants on a month to month rent don’t have any guarantees about rent prices. You’re absolutely free to raise the rent each additional month that they stay. Most tenants on a month to month lease expect increases each month. Just don’t take advantage, because remember your tenant can simply bail if they won’t tolerate the increase percentage.

Offers You a Wider Pool of Applicants

The more flexible you are with your lease options, the more candidates you’ll have to choose from. Remember, you don’t have to choose between yearly leases and month to month leases. You can just offer month to month agreements as an extra option. Offering month to month leases in addition to traditional yearly leases will give you a wider pool of applicants.

Cons of Offering Month to Month Leases

You’ll Have More Paperwork

Of course, every time a tenant turns, you have new paperwork to deal with. Overall, it’s more work on your part or on your property manager’s part when you have tenants coming and going on a monthly basis. Bear in mind, though, that most month to month tenants end up staying six months or longer. They often underestimate how long they’ll need their “temporary” housing.

Your Cleaning Costs Will Be Higher

If you have tenants moving out three times a year instead of once a year, your cleaning costs will increase, too. It’s a nominal expense, and something you can probably recoup with monthly rent increases, but it’s still an extra cost you should be aware of.

The Quality of Tenants Might Be Lower

Tenants who rent month to month may not be as stable as you would like. Still, people need month to month leases for a variety of reasons, so you’ll get quality candidates mixed in with less desirable candidates.

In my opinion, there’s no reason not to offer month to month lease options in addition to your standard yearly lease. It will widen your candidate pool, allow you to increase rents and give you the opportunity to be a landlord that helps out those in need of temporary housing.