When renting out a property, it’s important to require tenants to sign a lease before moving in. A lease helps outline both parties’ rights and responsibilities to minimize potential conflicts or misunderstandings.
A month-to-month lease is among the different types of leases a landlord can use. It is short-term and runs month to month until either party terminates it.
In today’s blog, you’ll learn all the basics of a month-to-month lease, including the pros and cons. Keep reading to learn more!
What Is a Month-To-Month Lease?
Just like any other type of rental lease, a month-to-month lease is legally binding. This means that it is enforceable under all relevant federal, state, and local laws.
But while it has a start date, its end date isn’t fixed; it runs indefinitely. To end it, either party must serve the other proper notice. In Indiana, specifically, either party must serve the other a notice of at least 30 days before lease termination.
If the tenant fails to move out within the notice period, you can move to court to obtain an eviction order. From start to finish, you can expect the process to take you between 3 weeks and 4 months.
When Is It Best to Use a Month-To-Month Lease?
When renting out a property, you may want to use a month-to-month lease because of the flexibility it offers.
Because it is short-term, you’re able to choose the kind of tenant you want. If you find a great tenant, you’ll want to keep them for as long as possible, or until they choose not to renew again.
Besides the flexibility, a month-to-month lease can also be ideal when extending a fixed-term lease. Especially, in case the tenant needs more time to move out of the property.
Month-to-month leases aren’t without their shortcomings, though. For instance, they make generating a stable income harder.
What Are the Pros of a Month-To-Month Lease?
For overall flexibility, a month-to-month lease is ideal. You’ll still be able to rent out your property even without any long-term commitment. Other than flexibility, the following are other pros of renting out a property using a month-to-month lease.
Lease Termination Is Flexible
Every landlord’s dream is to rent to a great tenant. A tenant who abides by the lease, notifies you of issues, and pays rent on time, every month. However, landing a great tenant is not always easy.
This is especially true if you don’t have a solid tenant screening process in place. In such a case, you may find yourself having to deal with problem tenants every now and then.
Luckily for you, with a month-to-month lease, you may be able to get rid of the tenant by simply refusing to renew their lease.
A Great Way for First-Time Landlords to Test the Waters
Are you renting out the property for the first time? If so, using a month-to-month lease can help you test what process works best for you.
For instance, you may be able to work on your tenant screening process. By experimenting with the kind of tenant it yields, you may be able to make relevant tweaks for optimum results.
Can Help You Charge More Rent
A month-to-month lease can also help a landlord raise rent without issues. This wouldn’t be an option when renting out the property on a fixed-term lease, which would require you to wait until the lease expires.
Before raising rent, though, make sure to conduct market research first. The last thing you want is to make your property less desirable by overcharging tenants.
Breaking the Lease Doesn’t Attract a Penalty
Breaking a lease usually attracts a penalty, especially if the reason is not legally binding. Fortunately, with short-term leases, it’s expected that either party will break the lease at some point.
Can Help You Land Great Tenants
As already aforementioned, it’s every landlord’s dream to land quality tenants. And once you land one, you’ll want to rent to them for as long as possible.
A short-term lease gives you the opportunity to experiment with different tenants until you land the quality you want.
What Are the Cons of a Month-To-Month Lease?
The following are the downsides of renting a property month-to-month.
The End Date Is Not Certain
When you’re sure about the end date, you’re able to plan. For instance, if you know a tenant’s lease will be ending in the next couple of months, you can make plans for things like renovations and advertising.
However, with short-term leases, the end date won’t be certain. At times, a tenant may only stay for two months and leave. Other times, they may stay for three to four months before leaving.
The Rental Income Is Unstable
While you may attract quality tenants with a good screening process, the flexibility of breaking a month-to-month lease might make it difficult to keep long-term tenants.
How does a Month-to-Month lease differ from a Fixed-Term Lease?
Unlike a month-to-month lease, a fixed-term lease runs between 6 months and a year. During this period, the terms of the tenancy remain constant, including the rental price.
Also, to break it, either party must wait until it expires. The only exception to this would be if the reason for breaking it is legitimate. For example, if the tenant is starting active military duty or the unit is no longer habitable.
Conclusion
The type of lease to choose should be dependent on your investment goals. Generally speaking, go for a short-term lease if looking for overall flexibility. If you’re looking for some stability, however, a long-term lease is your best bet.
For expert advice or property management help, look no further than Specialized Property Management Indianapolis. We can help maximize your returns through our exclusive technology. Get in touch to learn more!
