There are many different types of lease terms and they have different pros and cons. Here are a few examples…
Three Lease Terms to Choose From:
1. Month To Month (M-to-M):
- Pros: A short term lease allows either party to break the lease with 30 or 60 days notice depending on the lease.
- Cons: Tenants can break the lease at any time with proper notice. This is a problem if there are definite moving seasons in your areas.
- Ask Elizabeth: I only allow m-to-m leases with a $300 short term penalty. This compensates for the extra risk depending on the moving season and the work I have to replace the tenant.
2. 12 Month
- Pros: This is a normal lease term.
- Cons: A tenant can still break the lease. See: “Buy-Out Clause.”
- Ask Elizabeth: This is my normal lease term, but I have a Buy-Out Clause that effects both sides.
- Pros: This lease term locks in a tenant for a longer term. It reduces the term over.
- Cons: The tenant can still break the lease (see: Buy-Out Clause), and longer terms can allow the property to fall below market rate by a large margin. Especially if a lower rate was given for a long term lease.
- Ask Elizabeth: I have seen rental rates increase 10-15% in some markets. At the same time I have had four tenants break the lease due to buying a house or taking a different job in the past year.
In most cases, I use a 12 month lease with a Buy-Out Clause for my standard lease. I do offer a short term leases with a $300 a month premium as well.
What about you? What type of lease term do you prefer?1