I am getting ready to take my standard 1 year lease and re-write it to create a 2nd version that is Month to Month. I feel like a 1 year lease ties my hands too much when I have a problem tenant.

Anyone here who uses MTM exclusively, I would like to hear from you. Do your tenants care what type of lease you offer them? And what are your primary reasons for using a MTM lease?

Thanks Jasper and Rick,

For me, more advantages with MTM than disadvantages.

Make a list and go your own way.

Jasper or Rick,

Can you all list the primary MTM clauses I need to have on the 1st page of my 4 page MTM ? These items are what make up the difference between a MTM and a 1 year.

Periodic rental agreement. A lease is for term.

Busy,

My fixed-income seniors are the ones who are most concerned about future rent increases.

Roy,

I know you asked for those using M2M...here's a guy who is transitioning AWAY from M2M. Always good to know what is on the other side of the coin.

So for many the main issue I hear from LLs wanting M2M boils down to the lease tying the land lord's hands but leaving the tenant free to do whatever, whenever.

For Class C tenants, there is some truth to that. However, for Class A and B tenants who value their reputation, they realize they cannot just walk away from a lease without repercussions. They will get sued and end up paying, because they do not disappears off the grid and having things like bank accounts, etc.

So just to clear the air, we are talking about a world of Class C tenants only.

Within Class C, there is a lot of variety. I specifically seek out the BEST of the lot in Class C. There are hardworking, honest Class C folks who just want an inexpensive place to stay. They are my target tenant. For them, a lease is very likely to be honored.

There are also the fly-by-night Class C tenants. They will not honor a lease because they could not care less about their reputation and even if you can catch and garnishee them, they often disappear. For them, a year lease is likely not effective.

There is more than just the year lease vs. M2M to think about. We need to examine our target market carefully to understand which tool works best for that group. Careful screening also plays a big part.

I have had several dozen tenants pay ETFs to get out of year leases. I have only had a handful pull midnight move outs. I have only had to non-renew a tenant ONCE.

Therefore, on the balance, I am ahead by requiring year leases. With that in mind, I used to allow my leases to renew M2M after year 1, but have changed that to one year renewals. I want tenants to stay 3-5 years on average. The tendency of more tenants to pay ETFs and/or honor the full lease outweigh the disadvantage of the few bad ones.

Life/business is like that. There is no perfect scenario that always works. We have to do what makes sense 51%+ of the time and let that "pay for" the times it doesn't work out (49% or less).

Finally, let's look at the industry at large: Mike Butler gave a good talk at the Mr. LL Convention a few years ago why he does 3 years leases, with 3 year renewals. Also, professional property management companies do year leases for the most part. We should ask ourselves why these professionals who manage 100s of units are doing year leases. Are they foolish, or do they have policies and procedures that makes them more profit using year leases (or longer)?

We all have stories of "that one bad tenant I got rid of with a M2M lease non-renewal." Those are true stories. But our personal anecdotes of getting stuck with bad tenants in year leases are just that...anecdotes. I believe a properly written lease combined with effective management gives the LL many ways to get rid of bad tenants who are in a lease. Let's talk about how to make the year lease work effectively!

Thanks Sid for that very informative look at the other side of the coin. We need to have a Mr. LL convention /Roundtable discussion on this very topic,...'how to deal with Class C tenants'. They are a different breed than Class A or B's.

So, is receiving an ELT fee the primarily reason you prefer 1 year leases? I have been stiffed too many times on ELT's from 'good' Class C tenants. Now, I have collected ELT fees before, but they only came from a small handful Class B tenants who had a good credit history to protect.

All boils down to what has been said in this post, and in many other posts where Roy asks others to run his bizness for him. You HAVE to KNOW your market, your state and municipality’s laws, and YOUR personality. Others cannot do that for you from an Internet forum.

Someone who has a hard time searching for past posts might have a hard time finding ‘ the best of the lot’ in class C. I have seen some posters grab the ‘sound bites’ of a forum discussion, but then totally screw up the application of it, because they truly don’t understand. And, I think part of that comes from wanting to say, ‘ So and so TOLD me to do this’, in order to avoid responsibility for one’s own shortcomings. Not meaning to pick on you Roy, though I am doing that. I have many, many of my OWN shortcomings. Most I am aware of, and have learned how to deal with them. Some I still haven’t mastered ( like putzing too much, blathering on too much, over-explaining, and so many others...)

It might be that the period of the rental agreement isn’t so much the issue as perhaps better research skills (research tenant’s backgrounds,) and screening criteria are needed. And those have to be based on what is the ‘right fit’ for YOU, not anyone else. Might be time to become more comfortable researching for UNDERSTANDING, not just writing asking to be lead by the hand, and arguing with those who challenge you. Time to really learn YOUR market.

I know a fellow who has been both a landlord, and a flipper, he’s a highly skilled tradesperson. He realized many years ago that tenants are not for him. He takes advantage of down turns in the market to pick up cheap properties, fixes them, sometimes renting them (he does some small commercial) and when the time is right he sells. Key to his success is to only buy in relatively desirable areas, because properties in areas like my C class neighborhoods are only appreciating when there is euphoria in housing prices, like 2001-2005. ( my assessed values for property taxes have continued to decline since 2012. Doesn’t worry me in the least. I have wait lists of interested prospects)

I used M2M for 30 plus years, for two reasons. It allowed me to get rid of difficult tenants. I had one tenant who got his notice to vacate less than 2 weeks after he moved in, and it was no trouble to get rid of him.

The other reason is that Section 8 tenants must have a lease for the first year. So, I wouldn't have to reject them. I'd just tell them to check with their case worker to see if a month to month agreement was OK to use. Then I would never hear back from them.

Busy,

If my postings here irritate you, why do you waste your time answering them?

Roy, it’s not so much that your postings irritate me, it’s that you are so s ....l....o.....w..... to learn from the questions you ask. Remember, I worked in special education, and was quite good at it. Others are learning from what you post, even if you don’t seem to like that the posts on this forum belong to everyone. Or, at least to the webmaster, lol!

But, you are also making my point for me: I challenged you, so you decide BUSY has the problem. I’m wondering what kind of names you’d like to be calling me , haha!

Imagine you have over 100 apartment rentals, a dozen homes, a few strip malls and some offices. All of a sudden all of your tenants decide to move to a new location next to Disney Land because as a resident of that community, they get inside for free.

I've allowed this to happen because I was too short sided to realize that a "FIXED TERM LEASE" has many benefits for the landlord.

Until a unit is re-rented, I can recover damages for "lost rent" If I have to do some minor repairs to re-rent the unit, I can also charge the tenant those costs. Now that I have to rent out hundreds of units, I get no sleep, become grumpy and my wife files for divorce, taking with her half of my assets.

if your market has any seasonality, you will want to keep one year leases.

The times when it is the hardest for you to rent out units, that is the time when renters will get the cheapest rent . Thus renters will have more incentive to move at those times, not at the times best for you.

I think for the flaky type C tenant it is a mistake for a LL to enter into a home lease governed by LL/ tenant law.

I think Busy has a point here, friend Roy. Going to M2M won't fix your problems of tenants leaving "early". The problem that you cited initially is having problems with problem tenants. Sounds to me like you need the following:

1) Rock solid lease that addresses bad behavior of year lease tenants.

2) An effective management program to find issues early and deal with them.

3) The right kind of marketing and screening so you have fewer problem tenants.

That will achieve your goal. M2M just masks the problem of getting bad tenants in your unit. It doesn't address things like finding, selecting, and long-term retaining good tenants, which I believe is your "goal behind your goal" of wanting to go M2M.

Quite honestly I go back and forth about this. I had been doing m2m but the last two apartments I rented were under annual leases. I have someone who is going to rent a room (not in the rooming house) that said he was looking only to stay temporary, but I told him it would be a year lease. In his case, he has a solid local job, has been there for 14 years so I can go after him if he tries to skip out early. Usually, I only go m2m for these particular set of rooms. After going back and forth, I'm coming down on the lease side after doing m2m for a time. The issue for me is making sure the screening is tight so I don't mind putting them into a lease. Roy, your market may be different where there are simply more deadbeats and if faced with that situation, I'd go m2m. I say try it with a few and see how you like it.

Again, you have to find what works for you in your area, with your tenant pool. But to hear what works for other people gives you insight.

I do M2M exclusively now. I do not advertise it, just as I do not advertise that I take pets. Maybe that isn't fair, but I find most people expect a lease, so they don't question it. It also keeps those that are only looking for a few months looking where it might be advertised.

My "Rental Agreement" is written just like a lease, all the clauses of who is responsible for what (utilities, lawn care, plowing, etc), when the rent is due, how much, late fees, etc. Everything is covered just like a lease, however it is a month to month agreement that can be ended with a calendar month notice from either party (required by NYS).

The reason I like it. I really don't have to find a lease violation to give notice. If they are a pain, have too many parties, park on lawn, whatever, I just give them notice and get rid of them. Most times I do tell them I do not like something first, but I don't have to. If they are just a pain, and I can put up with it for more money, I can raise the rent to an amount that makes it worth my while. It seems tenants know this and I don't have as many problems. My shortest tenant right now is 5 years there. My longest was 19 years before I sold the place.

I had one tenant that said she wanted a lease so I did not raise the rent on her before a year. No problem. I wrote that there would be no rent increases for a year. I could still give notice if I wanted! I only had to give one tenant notice 6 months in. Too many police calls for domestic violence from the the ex of the girlfriend. SOO glad I could end that so quickly.

I use a lease for the first year because vacancies are a killer especially in the winter. Then convert to month to month after a year.

"regardless of what any lease says they are not going to have any early termination fees available for breaking the lease".

Roy, try a couple of M2M and see how it works for you.

Roy - I used MtM for all my rentals after dealing with several issues when we first got started. I had some trouble with short termers taking advantage until I came up with a new deposit and lease wording. We get a lot of winter renters and you have to be careful as many are from Canada and will just stiff you and go home in April when it warms up.

Until I went to seniors my tenant pool was abysmal. Though I did have a cop for awhile and a prison guard and some good casino workers. I would have given the cop free rent. I didn't have any issues in the 12 plex after he moved in. :) By going MtM I could give 'em the broom quick if they were trouble.

To curtail early outs I set the rental agreement up with a discount that would have to be paid out of their deposit if they left early. In AZ we can require 1 1/2 month rent for deposit. Basically if a unit was $500 they paid a $750 deposit. The rent was discounted by $50 a month based upon a years rent, so if they left the second month they'd pay $500 as liquidated damages for leaving early to cover the costs of the short term rental.

I don't know if it would hold up in court. I think it would, but as you know we don't need courts out here, we use the law of the desert and the rule of the shovel... ;) So I never had to test it.

This left me with only $250 for damages if they wrecked the place the first month. But that never happened. Once I went to MtM the majority of my troubles stopped.

A side benefit was people seemed to stay longer. I think it was because with a lease they were focused on finding someplace better at years end. On MtM they could leave anytime, but it was too much trouble to move, so they'd put it off until next month, and next month never came, pretty soon another year was gone.

I offered good tenants that paid on time for 6 months and weren't trouble the option of a years lease if it gave them peace of mind. Nobody ever took me up on it. So eventually I just dropped it.

Even my seniors were all MtM. Which they seemed to like since some of us old folks may not be here next month! It actually was helpful with several folks who moved on to assisted living or who passed in the hospital. It was less stress on the family to deal with too.

6 X6, I am used to slow learning. That is why I respond at all. The learning that needs to be done in this instance, in my never humble opinion, is to know oneself, know one’s strengths and weaknesses. We all have them we all just need to learn to do the introspection ( looking within one’s self) and determine our skill set, and then use that skill set to our advantage. Constantly asking others how they do things is meaningless IF the landlord doing the asking doesn’t have the same skill set with tenants as the person who gave an answer. Well, it still benefits the forum, greatly, in fact, as many many people read these posts, but don’t write on here. Among those persons reading, many might know their skill set well enough to implement those ideas.

I know it may seem harsh for me to take another landlord to task; I could just ignore him, or tell him it will be magical if he just does xyz. But, neither of those options would be helpful, in my opinion. ( strong inner need to be helpful. That’s just my nature, no sense fighting it.) I too have learned when other landlords have taken me to task over my lengthy posts ( write a book!) or my penchant (tendency that is almost automatic) to do things for my tenants, or give things to my tenants. Guilty on that score as well. And, I have learned to cut back a bit, on both the writing and the doing for tenants. Reading that other landlords don’t always want the full story, or that other landlords wouldn’t give or do as much reminds me that my tenants might ALSO not want quite SO MUCH from me. I can be more than a little intense, so, other’s critiques remind me to curb it a bit.

Roy,

Yearly. Because I KNOW people stay longer to fulfill their lease rather than pay the ELT

AND

others pay me THOUSAND$$$ each month to get out early.

If I went M2M I know I would have more turnovers and my income would plummet.

1. WHO is letting these troublesome people into your homes? Tell them to stop it!

2. There are ways to get people to move out, even with yearly and slow courts.

The homes you show us are not Class C. I see too many LLs hiding behind "Class C".

Market and use lease terms to show applicants you expect longer residents.

BRAD

PS

There is no such thing as "stiffed" by a res. Only LLs who do not pursue collections.

Start with ZT. Keeps the debts smaller.

Roy,

I have never, ever had a problem with my lease in court or with my attorney. My rental properties are all in Delaware County, Indiana. The small claims courts here tend to be LL friendly.

The first words on my lease, at the top, are the words-- Rental Agreement. The words "Rental Agreement" work fine in my county. Second line is the property address. The next line is my first paragraph.

First paragraph states:

1. Your month-to-month rental agreement begins on ______.

This question becomes up all the time. Again its what works for each LL and how he wants to run his biz. We only do leases

1. I know when the lease terminates.

2. We get 2 months rent if they leave early, they are happy and so I am.

3. Lot of the time they leave early on the lease, I get to show the empty paid unit and get ready for the next tenant.

4. They have to give me 60 notice if they are renewing or not.

5. From Sept to May we mostly dont have anyone leave in the dead of winter, where we would have to pay the heat. The local Heat co, leaves it on anyway set at the temp I pick.

6. I sent 30 day notice to vacate to any tenant I dont want whether on lease or MTM, they usually leave anyway.

7 Courts here dont care about leases, they just mediate the issue for a resolution.

8. I can move tenants between apts at lease renewal because most of my leases renewal at the same time.

9. The lease does make them stay to lease renewal time

10. We increase the rent at lease renewal time and they expect it, no suprises.

What does a MTM do for you with no benefits? What so you can terminate, you can do that with a lease.