Does a Month to Month Rental Agreement Make Sense When Lease Expires?

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One of my favorite questions to ask potential tenants is how long they’d like to sign a lease for.  This gives me insight into whether they’d be willing to sign an extended lease or if they’re just looking for something temporary, such as signing a month to month rental agreement.  High turnover can be a landlord’s number one expense so it makes sense that we want to lock in a tenant who’s willing to re-sign a lease every year.
One year leases are the norm in the rental industry and most renters know that.  But I’ve seen all sorts of things happen once the lease is up.  There are obvious benefits to having the tenant sign a one year lease, but are there any situations in which the landlord may want to go with a month to month rental agreement?

Standard One Year Lease Renewal

After a standard one year lease, most landlords will either let the lease expire, in which case it will default to a month to month rental agreement or have their tenant sign another lease.  The benefits of a one-year lease renewal agreement are pretty obvious since you get to increase rent if you desire and lock in the same tenant for another year.
I think it makes the most sense to force the tenant to sign another lease since you avoid turnover and you have the ability to raise rent at that time.  Sometimes landlords get a little caught up with raising rent though and forget about the costs associated with renting out a new unit.
Why mess with a good thing?  If you have great tenants, tell them you’ll keep the same rent but you want them to sign another one or two year lease.

A Month to Month Rental Agreement is Great for the Renter

I know that whenever I’ve rented a property (as a renter), I always wanted the lease to go to a  month to month lease once it expired. It was especially valuable when I was looking to buy a property since I was able to really take my time and I didn’t have to give my landlord one month’s notice until we were halfway done with the escrow process.
Even though I was a great tenant, I wanted to sign a month to month rental agreement since it would allow me to constantly be on the hunt for a nicer place or a better deal.  A spike in rent really wouldn’t have affected me much because I would have just looked for a cheaper place.

Any Landlord Benefits to a Month to Month Lease?

A month to month rental agreement could make sense for a landlord if they’re looking to sell their unit but it’s very difficult to show a property the way you want when you have someone else living in it.  I’ve heard horror stories about messy tenants scaring off potential buyers in this scenario.
All too often I see landlords that let their leases expire without forcing their tenants to sign a new one.  A month to month rental agreement really only favors the renter since it gives them an out.  Don’t worry about scaring off current tenants with a 1-year lease renewal since if they’re not willing to sign it, they probably would have left within the next year anyway.  The ideal tenant signs long leases never bothers you and pays on time every month.

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