Understanding the Pros and Cons of Month to Month Rental Properties

Advantages of month to month leases:

1. Rents can be adjusted on a monthly basis instead of a 12 month or longer basis. If the asset is in a growing area, this could save you many months where you could have charged higher rent.

2. Quick evictions. With month to month rent, in most cases the tenant has no legal right to live at the property after their month is finished.

3. Month to month premiums. Tenants are often willing to pay more in rent to not have the obligation of a long term lease agreement.

4. Tenants will lower credit scores can be a lower risk. If they don't pay rent that month, you can get them out quicker and often with less hassle than having to break a long term lease.

Disadvantages:

1. Possibility of mass move outs and drastic dip in occupancy. If some event occurs like an incident at the property, many tenants may choose to lease at the end of the month.

2. It can attract a certain tenant who doesn't have a long term stable income.

3. Turnover costs can be much higher if there are multiple move outs a year vs one move out with a long term lease.

4. You have to organize the stagger in the month to month expirations. Many lenders don't want to see all leases end on one day of the month for instance.

5. More work for the manager and staff.

6. By the nature of the tenant base you attract, there can be a higher number of court filings to get the months rent from evicted tenants. Sometimes the smaller amounts aren't worth it to get after in court so you write them off.

Where it can be beneficial to buy a month to month property:

1. Mom and pop style apartment complex where the marketing is sub-par. Rents are significantly below market rates. The advantage is that once you buy the property, you can immediately raise rents drastically the next month.