Many landlords know that a solid lease is important if they want to rent out their apartments or other accommodations profitably and worry-free. But not every landlord knows what type of lease is best for them.
There are two major types of leases: an annual lease or a monthly lease.
Many landlords say they're open to both types of leases, but they'd be better off learning how to actively choose between the two options.
Both monthly and annual leases have advantages and disadvantages, and landlords should carefully consider which option fits their property and needs.
In this guide, we'll give you some information about month-to-month leases so you can figure out if this is the type of agreement you want to focus on in your rental business.
What's a month-to-month lease agreement?
A month-to-month lease is a type of rental agreement that typically runs for 30 days. This type of lease usually renews automatically until the landlord or tenant sends notice.
Most month-to-month leases must be terminated with a 30-day notice. However, the details depend on local laws and what the landlord and tenant agree to.
When are month-to-month leases used?
Landlords typically offer this type of lease to tenants seeking semi-temporary accommodation. These tenants may include:
1- Digital Nomads
Digital nomads are professionals who work while traveling all over the world. With the increase in remote work after the coronavirus pandemic, the number of digital nomads has grown significantly.
In the United States alone, 15.5 million professionals describe themselves as digital nomads. The average digital nomad earns $80,000 a year, is educated, and is 33 years old.
These traveling workers typically stay between two and three months in the location of their choice. Americans, Portuguese, Germans, and Brazilians are the most common nationalities of digital nomads.
What digital nomads need is furnished accommodation with a fast Wi-Fi Internet connection and a suitable desk for work.
2- Corporate clients
There are companies that are looking for temporary accommodation for their current or future employees for various reasons.
For example, their employees may need to go to a certain place to take care of a business issue or attend trainings. Also, newly hired employees may need temporary housing until they find a permanent accommodation.
3- Students
There are many students who're looking for housing for one or two semesters. There are also students who participate in exchange programs and only want to stay in their place of study for a few months. Students who are doing an internship usually look for monthly rentals as well.
4- Couples and families
Couples and families may seek temporary housing for a variety of reasons, such as when they're building or renovating a home.
5- Medical and general tourists
Medical tourists who travel to a certain place to receive medical treatment are among the people who prefer monthly rentals.
General tourists who're visiting family members or traveling for recreational purposes and want to stay between a few weeks and a few months are also more likely to opt for a month-to-month lease.
How should you write a month-to-month lease?
It's important that you use the right wording when writing a month-to-month lease from scratch or when drafting a long-term lease that could be converted to a month-to-month lease.
To avoid legal problems, make sure all the terms of the lease are clear and include all the necessary information, such as the amount of rent, payment terms, the amount of the security deposit, whether pets are allowed, and the eviction process.
Answer the questions the tenant might have about the lease, and then include any additional notes in the lease that you feel are necessary.
There are many lease agreement templates created by legal professionals that you can find online. If you think you need help drafting the agreement, be sure to consult a legal advisor. It's an investment that will pay off.
Main benefits of monthly leases
Month-to-month leases can be of great benefit to landlords because they can enjoy less turnover than short-term leases and more flexibility than long-term leases. Let's take a closer look at the key benefits of month-to-month leases.
Less work
Less turnover means less work for landlords. When old tenants move out and you take in new ones, you only have to spend a few hours on cleaning, paperwork, and check-in. In the months when there's no tenant turnover, there's little work to be done.
There are a few other small tasks, like updating your availability and price, answering messages, or arranging for repairs that usually don't take up much of your time.
Higher rent
To cover the risks, landlords typically set higher rental rates for monthly rentals than for long-term rentals.
A study by 2nd Address in eight major U.S. cities found that monthly rentals are, on average, 87% more expensive than long-term rentals. This means a higher profit for landlords.
Another advantage of monthly rentals for landlords is that they can set a minimum length of stay for their most popular times of the year to maximize profits.
Not having to deal with short-term rental laws
Most short-term rental laws only apply to stays that are less than 30 days. Landlords who set 30 days as the minimum length of stay don't have to deal with the sometimes very complicated laws governing short-term rentals.
Easier eviction With a month-to-month lease, landlords can give their tenants notice when they need to move out for various reasons.
This is especially beneficial for landlords in countries where eviction laws are very strict and landlords usually have no choice but to wait for the long-term lease to end, even if they need their property for other purposes or if they want a problem tenant to move out.
Flexibility and control
Monthly leases give landlords the flexibility to block off their calendar for specific dates and update rates and rules as needed.
Greater peace of mind
As traveling professionals, students, and corporate employees make up a large portion of renters looking for an accommodation with a monthly lease, landlords will be dealing with more educated, professional landlords. This can give them more peace of mind.
Consistent income
Unlike traditional tourists, tenants seeking monthly rentals don't travel only during the tourist season. Therefore, they can provide landlords with a steady source of income almost all year round.
Easy property management
As monthly rental platforms become more popular, new smart, automated solutions are being developed to make it easier for landlords to digitally manage their property, even if they don't live nearby.
Contributing to worthwhile trends
Remote work and digital nomadism were some of the main trends that continued to gain popularity after the coronavirus pandemic, which prompted many companies to switch completely to remote work.
By offering month-to-month leases to people living nomadic lifestyles, landlords can contribute to trends that help professionals maintain a healthier work-life balance and leave a positive economic impact on their communities.
Month-to-month rental challenges
As mentioned earlier, offering month-to-month leases has many advantages. However, there are some disadvantages you should consider.
Lower perceived security
In the eyes of some landlords, a month-to-month lease means less security because the tenant can cancel after just 30 days.
Lower perceived financial stability
Because tenants can move out after a relatively short stay, some landlords associate month-to-month leases with a less stable and less consistent income stream.
However, the flexibility they receive in return and the higher prices they can set may alleviate their concerns in this regard.
Lack of dedicated platforms and marketing channels
Although monthly rentals are becoming more known and organized, this market is still relatively small. There aren't many platforms that specialize in this type of offer. Therefore, many landlords have to rely on traditional agencies, social media, or online ad sites to find tenants.
Flatio is one of the platforms that specializes in monthly rentals. Here, landlords can easily and quickly post their properties. The automated solutions Flatio offers landlords makes the rental process a pleasant experience.
And because Flatio focuses on digital nomads, landlords who list their properties on Flatio could gain access to a large network of professional tenants looking for monthly rentals.
Should you rent out your property on a month-to-month basis?
As discussed, there are both pros and cons to a month-to-month lease. For instance, you gain a lot of flexibility and control when you choose this market, but you may lose the stability that comes with long-term leases.
To make the right decision, it's wise to write down your personal and financial goals and your priorities for renting your property. This way, you can figure out which type of lease could benefit you more.
When making a decision, keep in mind that you and the tenant can always negotiate the terms of the lease, including the minimum length of stay.
If you're open-minded, you can come to a month-to-month agreement that satisfies both parties.
Don't hesitate to contact us if you have any questions about listing your property on Flatio.
