Do Month-to-Month Leases Benefit Landlords?

For some landlords, keeping units occupied from one month to the next and avoiding unexpected vacancies is a major source of stress. Most landlords rely on term leases to keep renters in place for a set period of time; but would you and your residents benefit from an alternative arrangement?

Here are 4 key questions to consider as you're deciding which type of lease to put in place.

#1: Is Eviction Likely?

Term leases don't just keep residents in place—they also make it difficult for you to evict them. Month-to-month agreements enable both parties to terminate the lease—so if you're having trouble screening out risky residents, they're worth considering, especially in a market with strong demand for rental units. You can always transition a responsible month-to-month resident to a term lease down the road—a win-win for both parties.

#2: Do Your Residents Need Flexibility?

More flexibility can be ideal for transient populations, such as students, long-term business travelers, military families, or couples shopping for a new homes. Additionally, if you work with less financially stable residents, a month-to-month lease provides a safeguard for both parties: The resident can move out if their plans change, or you can evict them if they stop making payments.

#3: When Will the Lease End?

Think ahead to the end of the lease. Will you be forced to fill a vacancy during a slow month? If so, it might be smart to use a 6- or 9-month lease rather than defaulting to a year. 9-month agreements also make sense for students, eliminating the need for subletters during the summer months.

#4: Are Rent Costs Fluctuating?

With a month-to-month lease, it's easier to change the terms of the agreement--including adjusting the rent as the market shifts. In addition, month-to-month leases generally have elevated rents to compensate for the risk of a sudden vacancy. You can also choose to keep the rent at a stable rate, giving the tenant the financial security of a term lease, while preserving your right to evict at will.

Review Your Leases Every So Often

It's important to update your leases periodically to make sure that they still benefit you and your renters. Could alternative lease durations help you to alleviate some of your headaches with residents? Sometimes, a slightly different approach is all you need.