5 Reasons to Use a Month-to-Month Lease

There are two main types of leases. Fixed term and month-to-month. Many landlords prefer to have a stable and long tenant in their rental. Most of the time, this works. We’ll go over 5 reasons why you might want to start using a month-to-month lease with your future tenants.

The top reason why you would want to use a month-to-month lease is getting rid of problematic tenants a lot easier. With a month-to-month lease, you can serve your tenant a 30 day notice that you don’t intend to renew the lease. If they don’t move, you can immediately begin the eviction process. With a fixed term lease, however, the only way to get rid of a bad tenant is if the tenant violates your rental agreement. This makes it a lot harder to get rid of problematic tenants.

Another reason why you would want to start using a month-to-month lease is you can raise rent more easily. With a fixed term lease, you typically can’t raise rent until your term is over unless it is speculated in your lease. With a month-to-month lease, you are basically renewing a new lease after 30 days. If the tenant doesn’t agree, they can move out.

Notice: Please make sure you are obeying all state and local moratoriums on legal rent increases.

The third reason is more freedom on what strategies you can execute on your investment property. You can easily evict for major restoration efforts, or if you plan on moving in yourself or a family member. Having a fixed term lease makes it a bit more complicated, especially in California.

The fourth reason is charging above market rent. Rentals with month-to-month leases are more competitive because there are tenants who also prefer short term rentals over long fixed term tenancies. This is especially true for areas with schools, a lot of business offices and hospitals. The tenants who may need to temporarily move to these areas for these reasons find month-to-month leases more appealing.

The last reason why it would be a good idea to use month-to-month leases for your rental property is to attract a bigger tenant pool. There are tenants who frequently move. The idea of a month-to-month lease will attract a lot more possible tenants.

Using month-to-month leases heavily depends on what type of market your rental is in. You shouldn’t base your decision solely on “getting rid of bad tenants.” If this is the case, you should dig deeper into your screening process and perfecting that.