Is a Month-to-Month Lease Better for Landlords?

Before listing your property for rent, it’s important to consider how you want to go about it. It’s also important to consider the length of the lease. You can choose between weekly, monthly, yearly, or even multi-year leases.

In this guide, the team at TRI Property Pros will go over everything landlords should know about month-to-month leases and how they differ from traditional, year-long leases. Let's dive in!

What Landlords Should Know About Month-to-Month Leases

As the name would entail, a month-to-month lease is one in which a property is rented on a monthly basis. Rental properties are typically leased on a yearly basis. This means that tenants have to vacate the unit (or renew their lease) after 12 months.

However, in monthly leases, the contract automatically renews every month without tenants or landlords having to sign a new lease. This means that tenants can stay on the unit for as long as they want, unless they or the landlord decide to end the lease.

However, it doesn’t mean that landlords need to draft a new contract every month. The same lease can be used for as long as the landlord sees fit and decides to change it.

Month-to-month leases are typically used for vacation rentals (in cases where tenants are planning to stay for more than a couple of days or weeks) and furnished rentals (these are particularly popular with professionals traveling for work and college students).

However, shorter leases can be incredibly helpful in cases where the landlord or tenants need more flexibility.

The Pros and Cons of Month-to-Month Leases

Over the past decade, month-to-month leases have become a popular alternative to traditional, year-long leases.

But this doesn’t mean that monthly leases are for everyone. To decide whether this is the right approach for your rental, you should carefully weigh the pros and cons of these types of leases.

The Pros of Month-to-Month Leases

A month-to-month lease can be great for you if you’re looking for:

More Flexibility

Month-to-month leases can be broken with as little as a month’s notice. Instead of being tied to a year-long contract, landlords and tenants can break things off if they need to.

Increased Control

As we mentioned above, monthly leases automatically renew every month. However, the landlord is allowed to change the terms of the lease as much as they feel necessary.

This includes changing the price of rent, updating existing rules, or even adding new policies to the lease. Landlords just need to make sure to give tenants sufficient notice before enforcing any changes.

Higher Earning Potential

Short-term rentals are often leased at a higher markup. This is to make up the cost of tenant turnover (increased cleaning, maintenance, and marketing costs). But it’s also because tenants are willing to pay more for the added flexibility this type of lease offers.

Growing Demand

Annual leases are still the norm, but short-term leases are slowly growing in popularity. They’re perfect for rentals in areas with a lot of students, digital nomads, seasonal workers, people traveling for business, and ample tourists.

They’re also popular among tenants who want to “test” an area before making a more permanent move.

The Cons of Month-to-Month Leases

Month-to-month leases come with certain risks. These include the following:

Financial Instability

An annual lease gives landlords stability, as they know that they’ll be collecting rent paychecks every month for the next twelve months (unless there are any pressing circumstances). However, this is nearly impossible with month-to-month leases.

You never know when tenants might need to break the lease and even though they’ll have to give notice, it might not be enough to find new tenants, making it incredibly difficult to maintain a stable source of income.

Higher Turnover Rates

Month-to-month leases give landlords and tenants the chance to end the tenancy at any time. This means more flexibility, but also, less stability, as tenants could break the lease at any given moment.

This can lead to high turnover rates, increasing the costs to maintain, clean, and advertise the unit, and leading to prolonged vacancies and financial losses.

Fewer Financing Options

Mentioning that you’re planning to invest in a short-term rental might reduce your financing options.

Traditional lenders often see weekly or monthly leases as a risky investment, due to the high tenant turnover and high vacancy rates. However, there are still plenty of alternative lending options you can explore.

Increased Operational Costs

Short-term rentals often require more care. After all, frequent tenant turnover leads to higher cleaning, maintenance, and marketing costs. This can make maintaining the property more difficult and more expensive.

Bottom Line

There are many ways to rent out a property. You could try house hacking, that is, living in one unit and renting the rest, or renting the entire property.

Additionally, you can choose between short and long-term leases. While annual leases are more traditional, month-to-month leases offer many benefits. The key lies in understanding its benefits and risks.

If you’re looking for more flexibility, like if you’re planning to sell the property soon and want some extra cash in the meantime, or if you just want to test the waters, then a short-term lease might be for you.

On the other hand, if you’re looking for a stable source of income and less work, a longer lease might be the better option. Want to learn what’s the best strategy for your Greensboro, NC, rental? Contact TRI Property Pros today!

Frequently Asked Questions

When Does a Month-to-Month Lease Make the Most Sense?

A month-to-month lease can be a practical option when your investment plans may change in the near future.

For example, you may be preparing to renovate, considering a future sale, or evaluating long-term rental demand in a particular Greensboro neighborhood.

It can also provide flexibility when managing furnished rentals or housing that serves professionals with temporary work assignments.

How Can Landlords Reduce Turnover With Month-to-Month Leases?

While month-to-month agreements naturally allow more flexibility, landlords can still encourage longer stays by maintaining the property, responding promptly to maintenance concerns, and keeping communication professional throughout the tenancy.

Pricing the rental competitively and performing regular property evaluations may also improve retention.

Are Month-to-Month Leases Common In Greensboro, NC?

Fixed-term leases remain the standard for many residential rentals, but month-to-month agreements may be appropriate in certain situations depending on the property, local demand, and the owner's investment goals.

In Greensboro and the surrounding Triad, landlords may find opportunities for more flexible leasing based on employment trends, relocation activity, or temporary housing needs.

What Additional Costs Should Landlords Expect With Month-to-Month Rentals?

Because tenants can leave with relatively short notice, landlords may experience more frequent turnover. That can increase expenses related to cleaning, maintenance, advertising, leasing, inspections, and preparing the property for new occupants.

Vacancy periods may also vary depending on market conditions and seasonality. Before switching to month-to-month leasing, estimate these potential operating costs and compare them with the additional rental income the property may be able to generate.

Can A Property Management Company Help Manage Month-to-Month Leases?

Managing flexible lease arrangements often requires closer attention to lease renewals, notice deadlines, rent adjustments, maintenance coordination, and marketing between tenancies.

TRI Property Pros provides residential and multifamily property management, investment services, maintenance coordination, and rental marketing throughout Greensboro and the surrounding Triad, allowing owners to spend less time on day-to-day operations.