As a landlord, you probably prefer textbook tenants who pay the rent like clockwork and stay for a couple of decades. But it doesn’t always work out that way. If you’re flexible enough to consider month-to-month vs. yearly residential lease agreements, both you and your tenants can benefit.
Even if you love people, you have to admit that screening tenants is a hassle. The advertising, wait, the calls, the interviews, the tours, the background checks, the starting all over again. So, if you only have to find new tenants once a year, you can breathe a sigh of relief and have faith that the rent will steadily roll in. You won’t have to clean and paint the property for a while. And if everyone likes the arrangement, you can renew the lease for another year of no-drama income.
But locking in a tenant for a yearly lease is a gamble, too. Choose the wrong renter and you’re stuck with trouble until the lease is up. That’s a long 12 months. You could end up with a non-paying renter who trashes your property and causes legal problems. In that case, it would have been better to keep the unit vacant—or made a smaller commitment with a monthly lease.
Your first thought might be, “That sounds like a lot of paperwork,” or “That’s not much of a rent guarantee.” But a month of rent is vastly preferable to a vacant unit, especially when there’s a shortage of eager renters. You can keep your options open as the lease automatically renews each month. And it’s not as if your tenants are just going to disappear one day without notice. Your lease can specify that they need to give you 30 or even 60 days warning before they leave.
Why won’t they commit to more than one month at a time? They can have all sorts of reasons. Maybe they’re looking to buy their own home, or are in town for a short-term work contract. Maybe they know they’ll have to relocate sometime within the year. Don’t assume that they’re unstable risks. If it’s not working out, though, you do have the benefit of ending the lease yourself.
In certain circumstances, month-to-month renewals can translate to more rent. If your property is in demand, shorter residential lease agreements might win the month-to-month vs. yearly contest. Because you don’t have to worry about a shortage of tenants, you can take advantage of the opportunity to raise the rent when comparable rates rise.
The Best Choice
Monthly? Yearly? It depends on a lot of variables. There’s no “right” answer, although an experienced real estate company can help guide you through the local market. If you need Longwood, Florida, property management or have questions about central Florida, contact R. Russell Properties. No matter the situation, we can take the hassle off your hands.