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.
3. Multi-Year
- 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?
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So for your short term leases, you charge $300 extra per month, is that correct?
Any takers on that option so far? The market I’m looking at right now wouldn’t necessarily support that…
Ben, Thank you for your reply. I personally do not believe in month-to-month leases. As a landlord they provide nothing but headache. In my markets there is a definite moving season. A period of time where most people move allowing lots of supply and usually the highest rent of the seasons. On the other hand as a landlord I try to be accommodating and understanding to everyone. Therefore I allow month-to-month leases at a $300 premium. This also allows you, the landlord to be able to get your tenants to resign a lease at their first renewal especially if you have a rental increase.