One of the many ways in which the pandemic has changed things for Americans is in the real estate market. Buying a house is getting harder as prices go up, but the cost of renting an apartment in many areas of the country is stabilizing or even going down. This means it’s a great time for tenants to think about upgrading their living situation, and for rental property owners to review their lease agreements. Are month to month leases a good idea? We break down the factors you should consider when making this decision.
Long-Term vs Month To Month Leases
First, let’s go through what a month-to-month lease is and how it differs from a traditional lease. Month-to-month leases have no specific end date, meaning they can be renewed or ended on a rolling monthly basis. The lease will automatically renew each month until or unless either party notifies the other of termination. Typically, the lease can be ended by either party, and requires a 30 days’ notice be given, though your state and local laws may have different requirements. Let’s dig into the pros and cons further.
Pros & Cons for Both Parties
Flexibility. Either the landlord or the tenant has the ability to terminate the rental agreement with just 30 days notice, which means one party can terminate before the other is ready. But the added flexibility of knowing they can move out without worrying about breaking a lease can be a very attractive feature to tenants, who may end up staying in a place with a month-to-month lease for years just because it’s convenient.
Uncertainty in income. With flexibility comes uncertainty, at least in some small measure. By offering month-to-month leases you are taking on the risk of losing the income from a unit that may not get filled right away.
No penalty for early termination. Month-to-month leases ensure that either party can terminate at any point. This is good for the tenant because it means they can move without a penalty— and it’s good for the landlord because it means an increased likelihood that the tenants will follow due process when it’s time to move out.
Keep quality tenants. If you’ve already got great tenants who aren’t sure of their plans for the coming year (they may be applying for a job in another city, or thinking of buying a home), offering them the option of a month-to-month lease can help keep them renting from you for a few months longer, rather than forcing you to roll the dice on a new tenant when the year-long lease is up.
Ability to change terms. With a month-to-month lease, the landlord has the power to change the terms at any point. This could look like adding amenities to the building that come with an additional monthly charge, or just raising the rent outright.
Short notice to find new tenants. 30 days isn’t a very long time to find a new tenant, depending on where you live and what the rental market is like. You may end up with a unit standing vacant for a month or two while you screen new tenants.
Fill units that vacate mid-year. On the other hand, if a tenant breaks their lease just a few months into the year, a month-to-month lease offers the opportunity to get someone into the unit for the remainder of that year, rather than wait until the cycle comes around again.
2021 has changed the landscape of the rental market for both landlords and tenants. Re-examining your current lease agreement may give you more tools to face the challenges involved in navigating that landscape. We hope this guide has been useful to you in deciding whether to implement month to month leases.
How All County Denver South Can Help
All County Denver South Property Management is here to help property owners get the best return on their investment through knowledgeable and trustworthy property management services— including helping you draw up your leasing agreements, whether they’re year-long or month to month. From managing tenant relationships to lease enforcement, we look forward to working with you to see how your investment can be a long-term, stress-free asset. For a complimentary quote, call us today at (720) 664-4550.