When meeting with a prospective tenant, one of the first questions that will likely come up involves the length of the lease agreement. Landlords and tenants often settle on month-to-month leases, but is that really a good idea? Before agreeing to a month-to-month lease agreement, it’s important to weigh the advantages and disadvantages first. Here are a few things you should consider.

Benefits of a Month-to-Month Lease:

Flexibility for Landlords

Month-to-month leases provide a distinct advantage to landlords over annual contracts, primarily with regards to having the ability to get rid of problematic tenants quickly. Since the lease agreement technically expires each month, all the landlord needs to do is provide sufficient notice ahead of time should they wish for the tenant to vacate the rental property. Landlords don’t have to worry about tracking renters down for payment or constantly serving them notices concerning complaints or bad behavior.

A month-to-month lease agreement also allows for greater flexibility in making changes. Should the landlord need to raise the rent or implement new rules, they can simply make them effective at the beginning of the next month, rather than waiting for a tenant’s lease agreement to expire.

Greater Control of your Property

Being able to get rid of tenants quickly can also be advantageous if a landlord is considering other uses for their real estate. For example, landlords may wish to sell their properties, make improvements, or move back into the property themselves.

A month-to-month lease agreement may be best if a landlord’s personal situation is likely to change in the near future. Maybe the landlord is contemplating retirement or is considering a move from the area and wants the ability to do so without being held down by long-term lease obligations. With a monthly lease, landlords can make these changes whenever they are ready, rather than waiting for the tenant’s lease to expire.

Ideal for Certain Renters

Month-to-month leases can also be ideal for certain categories of renters. A perfect example is contractors who travel regularly for their jobs, but only remain in a given area for a short period of time. Another is military personnel who are stationed within the city on temporary assignment orders.

These individuals are normally forced to stay in hotels because few other rental agreements cater to their requirements. Landlords who opt to offer monthly lease agreements can make their rental properties very attractive to this market. If there are a lot of these types of renters in your area, you may be able to capitalize on this opportunity by offering month-to-month leases.

Disadvantages of a Month-to-Month Lease:

More Vacancies

Flexibility on monthly leases can be a good thing in some ways, but they do increase the risk of more vacancies throughout the year. With a month-to-month lease agreement, renters can choose to leave at the end of the month, and may give the landlord little or no notice at all when doing so. This typically means landlords are more likely to experience increased temporary vacancies when offering month-to-month lease agreements.

Not only is it possible for renters to leave with little or no notice, but landlords have very little preventive recourse if the tenants do. With a traditional year-long lease agreement, occupants can be assessed a penalty for vacating the property early according to the terms of the lease agreement. However, there are no termination fees with a month-to-month lease agreement, which means landlords can often be left scrambling to find another tenant as quickly as possible to make up lost income.

Problems with High Turnover

A higher turnover rate also comes with its own problems. This includes:

• A greater degree of maintenance. Each time someone moves out, you have to clean and prep the residence for the next tenant moving in.
• The need for ongoing advertising. Month-to-month rentals are often a revolving door, so there is a constant need to advertise your vacancies.
• Tenant screenings are time consuming. More time is involved in taking applications, screening prospective tenants, and running background checks more frequently.
• Expenses start to pile up. The additional maintenance and background check fees can really eat into your profits. Many month-to-month landlords charge slightly more in rent for this very reason.

The higher turnover rate may not be a problem if your area has a housing shortage. But if your location already has more than enough homes and apartments for rent, increasing your vacancy rate might be an issue.

Moving Tenants Can Be Damaging to the Property

With month-to-month leases, your rental property’s carpeting may wear out more quickly because it is being shampooed every time a new tenant is about to move in. Likewise, floors will experience more foot traffic with people moving in and out on a regular basis. Frequently dragging furniture or boxes around the property can also take a toll on flooring, carpeting, and doorways as tenants move in and out.

Walls in the rental property are also more likely to get scuffed up from heavy objects knocking against them. As a result, landlords could end up needing to patch drywall or do touch-up painting more often than if the same tenants occupied the property for at least a year. The overall risks of property damage with month-to-month leases is something every landlord should consider carefully when weighing the pros and cons.

Is a Month-to-Month Lease Right for You?

Some people might argue that month-to-month property rentals automatically attract those who are less than stable. In other words, people who tend to float from one place to another will avoid homes that require longer leases in favor of ones with month-to-month options. Others may claim that month-to-month lease agreements are not a problem, so long as the landlord screens tenants properly beforehand. The idea is that a good renter will stay six months to one year even if they are able to break their contracts at the end of each month.

However, there is no ‘perfect’ term length when it comes to lease agreements. In some cases, offering month-to-month leases can be the more advantageous choice. In every case, consulting an experienced Las Vegas property management professional can greatly help you make the decision that is right for you, both financially and from a practicality standpoint.