Is A One Year Lease or Month To Month Agreement Best For Landlords

One of the most important parts of becoming a landlord is deciding whether you want to use a month-to-month rental agreement or a residential lease that spans a longer term.

With a long-term lease, you are typically committing for a year and with a month-to-month rental agreement, you are committing for just the next 30 days.

ONE YEAR LEASE
With an annual lease, you receive income for the next 12 months or more as tenants tend to stay longer. It is important to do a thorough background check and detailed credit check because it will be far more difficult to evict them.

The type of property is also important as California rent control protects tenants in multi-family units while providing more flexibility in single family properties. Payments under an annual lease are typically a bit lower than month to month.

MONTHLY RENTAL
Rents tend to be higher than leases and you can raise the rent more frequently between tenants with a monthly rental agreement since tenants tend to move around more and because it is more work for you.

The cost of vacancy can destroy your cash flow if you can’t find a tenant quickly. A monthly rental agreement continues until one party ends it, so you can hold on to a good tenant if the arrangement works for both of you.

On the other hand, a month-to-month rental agreement leaves you flexibility when a tenant does not work out.

LOCAL LAWS
The Apartment Owners Association of America (AAOA.com) has a form builder that you can customize for your state and your situation. These types of organizations also offer online rental application services. Yet, I would highly advise that you obtain a detailed and current lease or rental form.

SUMMARY
Landlords will always have trials and errors during tenancy, but they also have security. Their rental properties are part of their retirement plan. Basically, if you care about your property and your tenants, and you actually put in the effort to make sure that your tenants are happy and that your homes are well cared for, then it’s going to be a good investment.