It’s possible to make a good living as a landlord as long as you understand how the renting process works, including what month-to-month leases are and how they work. This lease is a common type of residential lease. Learning about the nuts and bolts of the month-to-month lease will empower you to meet the needs of renters and make the most of your business activities.
What Is a Month-to-Month Lease?
With a month-to-month lease, the renter may possess a property with no specific expiration date and make a rent payment to the landlord once per month. When there isn’t a written agreement between a landlord and the renter of a unit, a month-to-month payment structure is the norm.
How Does A Month-to-Month Lease Work?
A month-to-month lease continues until the landlord or renter gives 30 days’ notice. State laws vary, so notice might also be 60 days or 90 days. Add the amount of notice required to the month-to-month lease agreement.
Sometimes, when rental leases that do have definite end dates conclude, they become month-to-month leases. In other words, the renter may stay on from month to month rather than signing another lease with another set end date. In such circumstances, month-to-month leases function as lease extensions.
Why Choose a Month-to-Month Lease?
Many renters appreciate the freedom and flexibility that month-to-month leases provide, so choosing this lease type may make it easier to keep units rented. Some renters would rather not be stuck in lease agreements featuring set expiration dates, so they find the open-ended nature of month-to-month leases appealing.
With a month-to-month setup, renters may give four weeks’ notice when they want to leave, rather than needing to stay in a property until a lease with an expiration date concludes or paying an early termination fee to leave ahead of time.
Pros and Cons of Month-to-Month Leases
Month-to-month leases are agreements that have advantages and drawbacks, and landlords should understand every pro and con. As a landlord, you have options. You may rent out your property for a set term, such as three months, or a year, or two years. You may also rent a unit out from month to month. If there’s no rental agreement in place, you will automatically be renting month to month.
Pros
One benefit of a month-to-month lease for landlords is that this type of rental agreement will typically renew without either party’s input. Unless you or the renter want to make changes to the agreement, the month-to-month agreement will renew automatically. If you opt for a fixed-term lease instead which doesn’t have an automatic renewal stipulation, your renter could leave your property when the lease period is over without offering you notice.
Flexible end dates are pluses for many renters, as touched on earlier, and can also be advantageous for landlords. If you want the power to end a rental agreement by offering just 30, 60, or 90 days’ notice, this type of lease agreement may be ideal. You won’t have to commit to a longer lease agreement, and neither will the renter. You will be able to make a change to the lease agreement fairly quickly if you need to.
With this form of lease, you’ll also have the capacity to change the amount of rent you charge. In normal circumstances, there won’t be restrictions that stop you from raising the cost of the rent.
Another advantage to you as the landlord is that you won’t need to pay a penalty if you end the lease agreement, as you will have every right to do so. You may choose to end a lease at a time that suits you, such as during the summer months. During those months, it’s typically easier to attract new renters, since it’s simpler for them to move their possessions from Point A to Point B. You may also be able to charge more for a rental unit during the summer, which means higher profit.
Lastly, if quality renters prefer this type of lease agreement, choosing it will help you to keep them in your units, paying rent on time, and following your rules.
Here is a summary of the pros of the month-to-month lease agreement, from the landlord’s perspective:
- Automatic renewal.
- Flexible end date.
- Rent increases possible.
- No penalty for ending lease agreement.
- Able to end the lease agreement at a good time.
- Able to retain quality renters.
Cons
Now, it’s time to talk about the drawbacks, and one key disadvantage of this lease agreement is uncertainty. Since a renter will be able to leave relatively quickly, you will not be able to count on a long-term arrangement. Finding renters can be time-consuming and laborious, so keep that in mind when weighing the pros and cons of month-to-month lease agreements versus fixed-term lease agreements.
Another drawback is that you won’t have a lot of time to rent out the unit if the existing renter does decide to give notice. You may have just 30 days to find a new renter for the property.
If you have trouble finding a new renter, your rental income may fluctuate, and this may create financial instability. In contrast, with a fixed-term lease agreement you’ll always know how much money is coming in from a rental property.
Here is a summary of the cons of a month-to-month lease agreement:
- Uncertainty (renter can vacate property quickly).
- Little time to find new renters.
- Rental income may fluctuate.
Make a Smart Decision
Once you understand what a month-to-month lease is, how this lease agreement works, and what the pros and cons are, you can better make a wise and informed decision about whether this form of rental agreement is right for you. To help you decide, consider what your long-term plans for the property are, what your income goals from the property are, how you plan to attract renters, and what would be in your renters’ best interests.
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