Property Managers can use Month-to-Month Leases to Owner’s Advantage
For some rental property owners, keeping their rental properties full every month and avoiding unwanted vacancies is a source of stress. Every rental property owner should be concerned about tenant turnover and because of that worry most owners choose to rely on term leases to help keep tenants in place. However, experienced property managers such as Martin Feinberg know that term leases are not always the best option. Sometimes, month-to-month leases can serve a rental property owner better. The trick is knowing when a term lease will be the safest bet and when month-to-month leasing will produce better results.
Below are four things professional property managers should consider when they are deciding which type of lease to put in place.
How Likely is Eviction?
Though term leases are good at keeping renters in place, they also make it difficult for a property manager to evict them. Month-to-month leases, on the other hand, make it possible for either party to end the agreement. This can sound like a bad thing but when it’s difficult to screen out risky tenants, a month-to-month lease can provide a better alternative to letting the unit sit empty. If a tenant proves to be a good bet, and both the tenant and the property manager want to make the living situation a more permanent, the renter can transition to a term lease later on.
Do Potential Renters Need Flexibility?
Some populations of renters are more transient by nature. This group includes students, long-term business travelers, military families, or people in the market for a new home. This group of potential renters is often underserved but can actually be a good stable source of rental income for property managers and owners who are willing to work with them.
When Will the Lease End?
Experienced property managers understand that when they create a term lease, they need to be thinking a head to when the lease will end. They need to consider how difficult it will be to fill that vacancy during that time of the year. Will the lease end during a slow month? Will it end during a season that is known for being notoriously difficult to find new tenants? Sometimes it is smarter to use a six or nine month lease agreement rather than always relying on yearlong terms. This can also cut down on the need for subletters during the summer months if a property manager serves a lot of college students.
Are Rent Costs Changing?
Term leases provide some stability in keeping units full, but sometimes they can make it difficult to stay on top of the rent market. Month-to-month leases make it easier to adjust rent as the market shifts. Another thing to consider is that month-to-month leases typically have higher rents to begin with to compensate for the risk of a sudden vacancy.
Professional property managers understand the need to update their leases periodically to ensure they are still benefiting both the rental property owner and the tenant. Sometimes alternative lease durations can help alleviate stress and give property managers and owners access to markets they didn’t have previously.