Having an investment property sitting empty can certainly be frustrating. Knowing that the home or unit is costing you money every day, with no incoming cash flow to cover it, may make you feel like you should take on any potential tenant, regardless of the terms. But is consenting to a month to month lease really worth it?

The answer is, it could be – depending on the potential tenant, as well as what you are planning to do with the property over time. For instance, there are some definite drawbacks to month to month leases, such as:

  • No Income Security – One of the biggest drawbacks to a month to month lease is the fact that you have no long-term commitment from your tenant – which in turn means that you could end up losing the incoming cash flow from that property at any time. It also means that you are not able to plan ahead as easily for getting the property re-rented when the current tenant moves out.
  • Vacancy – When a tenant has no long-term lease commitment – which will usually include loss of their security deposit or other “penalty” for moving out before the end of the lease’s term – you have a much higher chance of dealing with an empty property again.

There can also be some advantages, though, to using a shorter term lease. For instance, if your tenant turns out to be less than ideal, you can provide them with a notice of non-renewal much more quickly than you could if you had a longer term commitment. In many cases, landlords can also charge a higher amount of monthly rent with month to month leases, which can allow you to generate more revenue in a shorter period of time.

You may also be thinking about selling the property – or even moving into (or back into) the home yourself. Shorter term leases can provide you with much more flexibility to do so, while at the same time, still earning at least some income from the unit until that time.

While going with a month to month lease may not be a good option for everyone, in the right circumstances, it could fit your particular situation. If you just simply don’t have the time to draft leases, find tenants, and / or deal with the day to day details of operating rental properties, give us a call. We will take those obligations off your plate, freeing up your time to focus on other things.