If you’re a new landlord or looking at ways to decrease your tenant turnover, you may be looking at different time periods of leases and wondering what are the best lengths for leases in terms of strategy.
The three popular lease lengths are month-to-month, 6-months, and year-long lease: but is one better than the other? There is no one right answer—it will depend upon the landlord’s preference. You should also account for eviction laws in your state and how that would impact any eviction or early lease termination. So when debating the best lengths for leases, weigh the pros and cons of each to determine which fits your business, state laws, and your retention strategy.
Month-to-Month Leases
A month to month lease can offer you a lot of leverage as a landlord. If you’re worried about being locked into a long-term lease with tenants, M2M leases are handy as it is easier for landlords to not renew the lease if you end up with a bad tenant.
The main concern with M2M leases is the opportunity for higher turnover when that is the primary pain point that landlords are attempting to reduce. However, if you’re in a situation where you’re uncertain about the longevity or sustainability of tenants—such as inherited tenants—M2M leases offer a lot of protection in their short-termness.
6-Month Leases
6-month leases can be attractive to landlords who are debating the merits of the non-renew flexibility of M2M leases and the lower turnover of year-long leases. They’re a good middle ground between affording landlords enough time and a little security to determine if the tenants will be a good property fit, while also having the option of non-renew at 6 months without dealing with a potential eviction situation if the tenants aren’t working out.
However, if you’re interested in testing 6-month or even 9-month leases, just be sure to keep seasonality in mind for the lease start/end dates. Typically, tenants are more likely to move during the summer when the weather is a little more accommodating. If your 6-month lease would end in the winter months, a year-long lease might be a better option if you’re seeking longevity.
One-Year Leases
One-year leases are by far and large the most popular length for leases. They’re good if you have high-quality tenants and an effective tenant screening process in place. In this case, year-long leases are good because it secures good tenants for a long period of time.
A lot of landlords will recommend doing a year lease for your first year to help reduce turnover costs—just make sure your tenant screening process is strong. Currently, many states have moratoriums on evictions due to COVID-19, so you might run into trouble evicting a tenant who hasn’t been properly vetted.
What are the Best Lengths for Leases?
While it’s a little cliche to say “it’s up to you” when it comes to determining the best lengths for leases, it really is the case. Each lease length comes with its own pros and cons, and for every type of lease, you will find landlords who expound upon its benefits and another who criticizes it.
Researching different landlord situational stories can also help you gauge which lease will offer you the most in terms of protection and security.You may want to experiment with different lease lengths as you develop your portfolio.
In addition to considering the best lengths for leases, take into consideration how lease laws and the contracts themselves vary by state.
Finally, after you decide the best lease length for your rental business, consider the best sharing and storage system for that lease as well. Part of the issue with paper leases is that tenants may lose or throw them away. Using a landlord-tenant software like RentRedi enables you to upload your lease electronically and share with the tenant companion app so that the tenant will always have their lease on hand and in their hand via their smartphone.
As an enthusiast deeply immersed in the realm of real estate and property management, I bring a wealth of knowledge and practical experience to the discussion on lease lengths for landlords. With a comprehensive understanding of the dynamics involved in tenant turnover and the impact of lease durations on property management strategies, I am well-equipped to guide you through the nuances of choosing the optimal lease length for your specific circ*mstances.
Let's delve into the key concepts presented in the article:
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Month-to-Month Leases:
- Pros: Offers flexibility for landlords, especially in dealing with uncertain tenant situations or inherited tenants.
- Cons: Higher potential for turnover, which may counteract the goal of reducing tenant churn.
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6-Month Leases:
- Pros: Strikes a balance between the flexibility of month-to-month leases and the stability of year-long leases. Allows landlords to assess tenant suitability without committing to a longer-term arrangement.
- Cons: Consideration of seasonality is crucial, as lease start/end dates may influence tenant movement.
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One-Year Leases:
- Pros: Widely popular for securing tenants for a longer period, reducing turnover costs. Ideal for landlords with effective tenant screening processes and high-quality tenants.
- Cons: May not be suitable for landlords looking for more flexibility or dealing with uncertain tenant situations.
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Determining the Best Lengths for Leases:
- Emphasizes that there's no one-size-fits-all answer and the choice depends on the landlord's preferences, business strategy, and state laws.
- Recommends researching different landlord experiences to gauge the benefits and drawbacks of each lease length.
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Consideration of Lease Laws and Contracts by State:
- Highlights the importance of understanding how lease laws and contracts vary by state, emphasizing the need for landlords to be well-versed in local regulations.
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Use of Landlord-Tenant Software:
- Recommends the use of technology, such as landlord-tenant software like RentRedi, for efficient lease management.
- Advocates for electronic leases to mitigate issues related to paper leases, ensuring tenants always have access to their lease through a smartphone app.
In conclusion, my expertise in real estate and property management positions me to affirm that the choice of lease length is a multifaceted decision, influenced by various factors such as business goals, tenant stability, and legal considerations. Always consider the unique aspects of your rental business and local regulations when determining the most suitable lease length for your specific situation.
