When it comes to rent collection method, landlords and property managers have to decide which method to adopt. You will have to choose between collecting your lease annually or month-to-month rental lease. These two methods have their unique advantages and disadvantages.
The month-to-month rental lease allows your tenant to live on your property on a monthly basis and pay his lease every month. If you are not sure which method to adopt in collecting your lease, this article will help you decide by showing you the advantages and disadvantages of a month-to-month rental lease.
Top Advantages of Month-to-Month Rental Lease
Allows You Update Your Rent Price
When you adopt month-to-month lease as a rent renewal option, it allows you to easily update your rent price. This method gives you the freedom to review your rent price upward or downward. You can always justify this with the flexibility and convenience you are offering to the tenant by collecting month-to-month rental lease.
Most tenants who are just looking for a place to stay on a very temporary basis appreciate this type of arrangement. It allows them to stay on your property without a long-term commitment. Thus, you will find it easier to attract new tenants when you have this rent collection method in place.
Keep Quality Tenants
Since this lease period covers just a month, it allows you to kick out bad tenants after just one month. On the other hand, you can keep quality tenant who pays their rent on time and keeps to your rental agreement.
No Penalty for Breaking the Lease
Like we mentioned above, this method of the rental agreement allows you to terminate the tenancy of any tenant without facing a penalty. If you are considering selling the property in the future or you are just getting started, it is recommended that you adopt month-to-month rental lease.
Terminate Lease At an Optimal Time
The great thing about a month-to-month rental lease is it gives you the freedom to end the lease when you think you have chances of attracting better quality tenants. Most people move during summer. It is easier to increase your rent price during this period and still attract quality tenants.
The Disadvantages of Month-to-Month Rental Lease
Keeping tenants on a temporary basis can make things unstable for you. It doesn’t give room to create a solid tenant-landlord relationship. This instability can affect your rental income in the long-term.
Short Notice to Get New Quality Tenants
Since you have less time to find new tenants, you may not be able to get the type of tenants you have in mind. Moreover, finding new tenants in just 30 days can be exhausting even for the most hardworking landlord or property manager. In most cases, this time crunch forces you to abandon a thorough tenant screening which will lead to getting poor-quality tenants.
Uncertain End Date
In some cases, it can be very beneficial to know the end date of every rental agreement. The uncertain end date that is common with month-to-month rental lease usually leads to uncertainty and instability. In most cases, you want a quality tenant to stay longer and you don’t have to work hard again to find new quality tenants. In this situation, uncertain end date will cause some problem for you.
Deciding to get your rent annually or monthly is a big decision. There are advantages and disadvantages to both methods. You need to weigh both options carefully. If you are just starting out, I will recommend that you first speak to an experienced Los Angeles property management company.