The Pros and Cons of a Month-to-Month Lease for Owners

Updated March 29. 2022.

When you have a residential rental property, one of the more important decisions is what kind of residential lease agreement to use. There are standard residential lease agreements as well as month-to-month residential lease agreements that may be better for your situation.

What should property owners keep in mind about a month-to-month lease? Our Tacoma property management experts weigh in!

What Is a Rental Property Month-to-Month Lease?

A month-to-month residential lease agreement is a short-term contract that tenants and property owners sign for a fixed period of time of one month. After this fixed period of time, the residential lease can be terminated with 30 days' notice by either party. If a landlord doesn't receive notice from a renter, the lease renews again for another month. 

With a month-to-month written rental agreement, both the tenant and a property owner have the flexibility to terminate the residential lease on their own at any point in time during those thirty days, provided they give that proper notification. By contrast, a standard residential lease agreement usually lasts from one year to two years, with renters and the property owner locked into the terms of the agreement for the duration of the agreement (monthly rent, security deposit, etc).  

What Are the Pros of Using a Month-to-Month Lease?

Using a residential month-to-month residential lease has several advantages. First and foremost, it provides great flexibility to both parties. It's an excellent option for new renters or housing situations where tenants may not want to be locked into a long-term lease. In some cases, after a long-term lease ends, agreeing to a month-to-month contract helps renters if they need an extra month or two before moving out. This flexibility also gives property owners more time to find quality tenants for a new long-term lease. 

Another advantage is that a month-to-month tenancy allows a property owner to adjust the monthly rent amount as needed. This can be extremely advantageous for landlords, as they can charge higher rents overall than with a standard lease agreement. 

A Good Resource for Problem Tenants

As mentioned before, because a month-to-month residential lease renews automatically every month unless one party provides written notice of termination, it's an excellent option for real estate investors dealing with problem tenants that don't pay rent or destroy the rental unit's condition. By using this type of residential lease, you can give these troublesome residents a chance to improve their behavior without agreeing to a longer residential lease agreement. Once the residential month-to-month residential lease term is over, you can decide whether or not to extend it based on a tenant's behavior and performance.

This type of residential rental property agreement also provides more opportunities for both tenants and investors to serve a variety of residents. For example, if tenants only stay in a property for short periods of time (for example, students or people who are in the Tacoma area for only a few months at a time for work), this kind of residential rental property agreement allows them to get out of the month-to-month residential lease contract without any problems or extra fees. This makes it a good option for tenants who plan on moving often and doesn't want to be tied down by long residential lease agreements.

What Are the Cons of a Month-to-Month Lease?

The biggest argument against a residential month-to-month residential lease is that it can create a lack of long-term stable rental income for property owners. For example, if you have put time and effort into finding great tenants for your residential rental property, you may not want to set them up with this kind of unique residential rental agreement. 

Month-to-month residential leases also require more work from both tenants and real estate investors, as everyone needs to give proper notification of termination before the month-to-month residential lease is over. With short notice before a renter moves out, property owners have less time to market the rental and find a new tenant before the current resident moves out. 

Lack of Commitment Leads to Income Loss

Without a long-term commitment, real estate investors also experience high turnover and higher tenant screening costs from needing new residents more frequently. This is one way month-to-month residential leases can hurt ROI (return on investment) for residential property investors. 

In addition, this kind of contract makes it easier for renters to violate the terms of their contract (for example, if they use your property for illegal purposes). If this happens, it can be difficult to evict them from the property quickly, leading to significant income loss. 

A Tacoma Property Management Company Helps With the Best Lease Agreement

There are both pros and cons to using a month-to-month lease agreement. It's important for both renters and property owners to carefully weigh the pros and cons before deciding if this type of residential lease is right for them.

If you're not sure how to set up a month-to-month rental agreement or which lease is ideal for your long-term goals, the best property management company Tacoma, Wa offers can help! The Joseph Group creates custom lease agreements for property owners and delivers professional property management services to maximize returns. Learn more when reaching out to our experienced team!