Is It Worth It? Pros and Cons of a Month-to-Month Lease Agreement

By Rentwell

Published August 19, 2021. Updated April 20, 2023. 

If you're a real estate investor in the Philadelphia area, keeping your rental properties full is a top priority. Sometimes, that may require changing up the way you do things.

Maybe you've thought about offering a short-term lease agreement for some of your properties but weren't sure if it was the best route to take. If short-term doesn't make sense, are there other options for renters who can't commit long-term?

What about a month-to-month option? Many property owners incorporate monthly leasing options into their operations, but it's helpful to understand the pros and cons of doing a month-to-month lease agreement before jumping into it.

So, today, our Philadelphia rental management experts weigh in on the pros and cons of this type of lease and whether rental owners should consider it when planning leasing strategies.

Man with question marks, should you consider a month-to-month lease agreement concept.

What Are the Pros of a Monthly Rental Lease Agreement?

If you're considering a monthly option to improve occupancy rates or accommodate a resident dealing with sudden job relocation, there are plenty of pros to accommodating tenants with this option.

Flexibility has some perks! Here are a few benefits.

You're Not Locked Into a Lengthy Lease

Navigating a month-to-month lease offers flexibility that many landlords find appealing.

Unlike a traditional 12-month or longer lease term, you're not tied down to a renter who may turn out to be problematic. If a tenant consistently fails to pay rent on time, you have the option to simply not renew the lease so the tenant moves out, thus minimizing potential financial losses and headaches and avoiding the eviction process.

Long-term lease commitments can become a liability when dealing with difficult tenants, leading to expensive legal battles or time-consuming property issues. However, a monthly agreement allows you to assess tenant reliability without long-term risks. You can make quicker adjustments to lease terms or even rent pricing to adapt to market conditions.

Ultimately, the month-to-month arrangement provides landlords with a safety net and greater control over their property investments.

You Can Change the Rent Amount or Other Terms More Often

Another advantage of opting for a month-to-month residential lease agreement is the enhanced flexibility it affords you as a rental property owner.

Unlike a fixed, year-long lease, you're not committed to the same rental rate for an extended period. This allows you to adapt to fluctuating market conditions, raising or lowering rates as demand dictates.

You can also modify other terms of the lease with relative ease, such as pet policies, security deposit requirements, and other rules and responsibilities outlined in the agreement. This agile setup enables you to better respond to evolving situations, whether they're driven by market trends, tenant behavior, or new local ordinances.

It's a Good Selling Point for Some Tenants

Short-term rental options cater to a specific segment of renters who need flexibility, something that can be hard to come by in traditional leasing arrangements.

Whether they're relocating to Philadelphia for a temporary job or visiting a sick family member in a different city, these individuals often find hotels to be expensive and lacking in space for extended stays. These properties can also appeal to frequent travelers or those between permanent residences.

A short-term rental lease agreement provides an ideal solution, offering the comforts of a home without the commitment of a long-term lease. As a residential property owner, offering short-term leases could fulfill a niche market need and help you fill a vacant property and potentially command higher rents, making it a win-win for tenants and owners.

You Can Charge More for the Rental

Since a month-to-month lease agreement is not as common as fixed-term leases and offers more flexibility to tenants than a long-term lease, property owners can often charge a bit more than you typically could for an extended one-year lease.

If you're not sure of the appropriate amount to charge for a monthly agreement, our Philadelphia property management experts can assist you with setting the appropriate rent price for monthly leases.

House keys with a calculator and calendar on yellow background, residential lease agreement concept.

What Are the Cons of a Monthly Residential Lease Agreement?

Understanding the negative effects of renting on a monthly basis is also critical when considering this type of lease option. As experienced property managers, we've pulled together some of the drawbacks to analyze the pros vs. cons before offering flexible leases to residents. 

You Could Experience Higher Turnover Rates

Just as you have more options to remove tenants after their monthly lease agreement expires, they can leave at any time with proper notice.

This could result in a greater turnover rate and more empty properties for you.

Tenants have to give you notice to comply with the monthly terms. Still, even a 30-day notice isn't much time to market, screen, and place a quality resident when trying to fill a rental that becomes empty before you anticipated.

It's More Work for Property Owners

Shorter lease terms can lead to more work for you if you don't have a property management company in Philadelphia, PA.

Every time a tenant gives notice that they're moving out, you'll need to conduct a make-ready process that includes cleaning, touch-up painting, maintenance, and more to get ready for a new renter. 

If you frequently have tenants coming and going with monthly residential leases, you could conduct a make-ready several times within a year. This becomes a costly and time-consuming practice that can eat away at your bottom line and cash flow. 

You Have a Shorter Window to Screen Tenants

Even with month-to-month leases and renters who don't stay in your property for very long, it's essential to conduct tenant screening every time! However, when you have tenants coming in and out in a shorter window of time, you have less time for screening them. 

Screening helps weed out risky tenants who may not pay their monthly rent on time or default altogether. It also makes you aware of prospective tenants with a poor employment history or criminal background.

Thorough tenant screening is a vital component of reducing turnover—even with a monthly Philadelphia lease agreement.

Our Experienced Philadelphia Property Management Team Helps Investors Make Smart Lease Decisions

When weighing the pros and cons of lease options, it still might be difficult to decide which way to go for your lease agreements. Should you go with a month-to-month or an extended one-year lease? This is where the help of a Philadelphia property management company can make a difference! 

Rentwell understands the challenges property owners and renters face when matching the right tenants with rental homes and lease terms. If you're not sure the best way to go, reach out to our experts, and let's talk about how our property management services can help.

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Topics: Philadelphia Property Management Investing Insight Philadelphia Rental Property Investment Month-To-Month Lease Agreement Residential Lease Agreement