Starting out in the rental property world, there are a lot of possibilities to consider. First where to buy a property, then what property to buy, and then how much to offer—but that is just the beginning. When you are creating a lease agreement for your tenants, you have a lot of decisions to make. One decision that will influence all of the others is the duration of the lease. How do month-to-month leases benefit landlords?
Fixed Term v. Month to Month
Typically there are two different kinds of leases (and within these two, thousands of others.) First, there are fixed term Leases. These leases typically last for a year or longer. The rental rate cannot change during the lease period and tenants must give landlords 60 days notice before moving out of the rental property. The second kind of lease is a month-to-month Lease. These leases last for a month at a time. Tenants need to give landlords 30 days notice before vacating. The rental rate is not fixed and can fluctuate from month to month. If you are thinking of setting up a month-to-month lease for your tenants, it is important that you think through the benefits and risks of this kind of lease. While a month-to-month rental property might be a good idea for vacation rental properties, college town properties, or undesirable locations (like run-down areas of Salt Lake City where the homeless population is particularly large.) Travelers rarely stay in a vacation rental for more than a month, so opening up the property to as many renters as possible is a good idea. College students drop out, switch schools, and move home for the summer, so month-to-month leases might appeal to them as well. Undesirable areas are more likely to pull in tenants who are unable to consistently pay rent.
Benefits of Month-to-Month Leases in Salt Lake City
One of the biggest benefits of month-to-month leases is being able to terminate leases for any reason as long as you give your tenant 30 days notice. This can help you get rid of non-paying tenants or tenants who cause other problems without going through the eviction process. This can save you big money and a huge pain in the neck. The next benefit hardly needs explaining. When you reset the lease every month, you can raise your tenant’s rent in accordance with the current market rates. If rental rates go up, you pull in the optimal amount of money every month rather than locking in a predetermined rate when your tenant signs.
Risks of Month-to-Month Leases in Salt Lake City
The risks of month-to-month leases boil down to this: a vacant rental property will never make as much money as an occupied property. Even if that property has a fixed term lease with a rental rate that is lower than the current market rate, you will still be making more money than you would if the property was empty. With a month-to-month lease, you can terminate the lease with a 30-day notice, but your tenant can vacate the property with the same amount of notice. That does not provide you with a lot of time to find a replacement renter.
Should You Use a Month-to-Month Lease?
Deciding whether or not you should draft a month-to-month lease will always be dependent on a host of different variables. Once you understand the tenant pool that you are bringing in and your property’s location, you should be able to determine the best lease-type for you and your property. If you aren’t sure, or you want a second opinion, Keyrenter Salt Lake can help you through every step of the property management process. We can help you draft the lease that’s right for you.