Are you thinking of changing your leasing strategy? Some rental property owners prefer long-term lease arrangements while others like a month-to-month lease. Both options have pros and cons, so the better option will depend on the circumstances and your preferred property management style. We compiled a list of some of the pros and cons of having a month-to-month lease in case you want to learn more.

The Pros:

1. A Flexible Arrangement

A month-to-month lease can end or continue at the end of each term. If continued, there is no need to sign another agreement since the contract is typically renewed unless otherwise stated. Either party can terminate after a 30-day notice. This makes it a flexible arrangement that can serve both you and your tenants well. Neither or you will have to commit too far into the future, so you are both free to look for alternatives in case the situation changes. For example, your tenants may be waiting for a job offer in a different region, or you may want to perform major renovations. 

2. Faster Market Response

By taking it month by month, you would be able to react quickly to the current economic situation. You could raise the rent at the end of each period if there is surging demand. This typically wouldn’t be possible in a long-term arrangement since the rates are generally fixed throughout the contract period.

3. Immediate Tenant Removal

It is usually more difficult to evict bad tenants while their contract is active. This is particularly true for those who have been living in the property for a while despite their non-payment of rent and other issues. If the lease is renewed from month to month, then it should typically be easier to terminate and bring in better tenants because they will be in violation of the contract if they stay there longer than they’re supposed to.

The Cons:

1. Volatility Leads to Uncertainty

Flexibility is great if you have a lot of ideas that you wish to try and you don’t fear change too much. However, it can be a challenge if you prefer stability. The fact that you won’t know whether the tenants will still be there next month or not can lead to uncertainty. It would be difficult to plan too far ahead, so you would need to be grounded in the present and take everything one step at a time.

2. Longer Vacancy Periods

Since tenants are likely to come and go, there may be longer and more vacancy periods in which rental homes are not generating income. It can take a while for the rental property investment to break even with this kind of setup. Owners are also forced to constantly advertise their units and attract new tenants. For those who got into rental properties seeking passive income, this might not be the most ideal scenario.

3. Risk of Financial Hardship

Finally, a month-to-month lease could lead to low cash flow because of the vacancies. The bills will still be there even if the rental payments stop. Owners run the risk of financial hardship if this continues for an extended period.

Now that you are aware of the pros and cons, you should be able to make better decisions based on your own current situation. However, consider consulting experts if you need help. Specialized Property Management Tampa can help you get the most out of your rental property in any situation. For more information or to get a quote, call us at 813-548-3045 or contact us online.