Looking to rent out your property on a monthly basis? If so, it’s important that you consider both the pros and cons of doing so.
At Windermere Property Management, we believe a month-to-month lease has its benefits. So, the following are answers to commonly asked questions regarding a month-to-month lease.
What Is a Month-To-Month Lease?
First and foremost, a month-to-month lease is a legally binding document between a landlord and a tenant. Unlike a long term lease agreement, a month-to-month agreement runs for a single month or until either party terminates it by notifying the other.
In the state of Washington, the notice period to terminate a month-to-month lease is 20 days. Generally speaking, most landlords use short-term leases to extend existing leases. But it’s also possible for a landlord to use a month-to-month lease right from the start of a tenancy.
Why Should You Consider a Month-To-Month Lease?
You should consider renting out your property on a month-to-month lease if you’re looking for some flexibility in the kind of tenant you rent out to. A short-term lease is also ideal after the end of a long-term lease. It can come in handy when, for instance, your tenant needs some extra time to look for another home.
But month-to-month leases may not be ideal if you’re looking for consistency in rental income. Having vacancies now and then may mean a suboptimal return on investment.
What Are The Benefits of a Month-To-Month Lease?
The following are some reasons why renting out a property on a month-to-month lease may be ideal.
Flexible End Date
With a standard lease, your property will be occupied for a fixed period. Usually, this can be anywhere between 6 months to a year. To terminate the tenancy, you’d have to wait for the entire period to end to take back control over your property.
But with a month-to-month lease, all you’d need to do is serve your tenant with a 20-days advance notice to get rid of them. This is an especially good option if you ever encounter a difficult tenant.
Raising The Rent
A month-to-month lease will allow you some flexibility in the terms of the lease agreement. Under Washington laws, you can raise the rent after serving your tenant a 30-day written notice.
That said, the reason for doing so must not be for discriminatory or retaliatory reasons. Since the state currently preempts state or local rent control, you can charge as much as you want for rent.
Breaking The Lease Early
A lease agreement requires a tenant to continue paying rent for the entire period, whether or not they live there. Breaking the lease early will often lead to penalties unless the reason is legally justifiable.
Breaking a month-to-month lease is easier. All you have to do is provide your Washington tenant with a 20-day advance notice.
Keep Quality Tenants
The goal of any landlord is to rent to great tenants. Once you have one, you’d want to retain the tenant for as long as possible. You’ll just need to keep renewing their lease until they eventually move out.
What Are The Problems With a Month-To-Month Lease?
While month-to-month leases are ideal in certain circumstances. They do also have their disadvantages in some respects.
Uncertain End Date
A fixed-term lease runs for a specific period. As already mentioned, this can be anywhere between 6 months and a year. But when it comes to month-to-month leases, the end date isn’t predictable, you need to keep in constant communication with your tenant.
Consequently, you may think you’ve landed a great tenant only for them to leave in the next couple of months.
Short Notice To Find New Tenants
As already mentioned, to end a month-to-month lease in Washington, only 20 days’ notice is required. So, finding a replacement tenant with 20 days’ notice can be a challenge for your [marketing process](https://www.wrents.com/advertise-your-rental-property).
In addition, the time crunch can also compromise your screening process. The effect of this can be detrimental to your bottom line. You may end up renting to a difficult tenant that doesn’t pay rent on time or care for your rental property.
Unstable Rental Income
Having great tenants is an obvious win for any landlord. But they will only become beneficial if they rent long-term. Keeping them temporarily won’t be as beneficial to your bottom line.
How a Month-To-Month Lease Differs From a Long Term Lease
Firstly, month-to-month leases only run month after month. They run for as long as both parties agree to. To end it, either party must serve the other a 20-day’ notice.
A long term lease, on the other hand, runs for a fixed period. This can be anywhere between 6 months to a year. To end it, a tenant must either wait for the fixed term period to end or have a legally justified reason to end it early.
Should a Month-To-Month Lease Be Signed?
In the state of Washington, leases can be established either orally or in written form. Once a tenant pays rent in exchange to inhabit your property, they automatically obtain certain inherent rights.
For example, they obtain the right to obtain rent receipts and the right to know where you’ve stored their security deposit.
So, is a month-to-month lease better for landlords?
It entirely depends on your investment goals. Are you looking for overall flexibility in your lease?
If so, renting out your property on a month-to-month basis may be ideal. But if you’re looking for a fairly stable and consistent rental income, then a lease would be a great option.
For expert help, Windermere Property Management is here for you. Our goal is to provide property owners with stress-free rental ownership experience. Get in touch to learn more!