How to Avoid Month-To-Month Leases as a Property Management Company
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Month-to-month leases can be a helpful option for residents who need an extra month or two in a property before moving out or signing a lease renewal. A month-to-month option might also be helpful to assist residents through a crisis or recession as a short-term solution before renewing a lease.
However, getting stuck in a cycle of month-to-month renters is a fast way to lose money (and clients) from your property management business.
- A fixed-term lease guarantees income and stability for your property owners (and your company) for a twelve-month term.
- When you allow a renter to go beyond a month or two with a temporary agreement to continue living in a property, you sacrifice the quality of your services and risk income loss.
Investors won't stand by you and return to your services if your lease renewal process isn't thorough and effective. Here's how a property management company should manage the lease renewal process to delight your property owners and residents!
>When Do Month-To-Month Leases Make Sense?
While flexibility can sometimes be beneficial to renters and property owners, too many month-to-month leases can lead to unstable income and insecurity. Month-to-month leases should be a temporary option used for situations that truly call for an additional month, such as the following scenarios:
- A resident has been out of town and unable to sign a renewal for a new lease term.
- A renter's circumstances require one more month in a property before moving out.
- You inherit holdover renters, and there is a transition time to roll residents over into new leases.
A renter who won't commit to a full lease term and a new lease means you could lose their monthly rental income without enough notice to find a new resident. Offering a month-to-month solution shows flexibility when a renter really needs it, but property managers shouldn't offer this option as a regular habit.
If you find yourself in an ongoing cycle of month-to-month renters, it's time to fix your process! Property investors depend on their property management company to guarantee renters and signed leases. Renters also need to know they have a confirmed place to live for the next twelve months.
You'll quickly lose business if you're not on top of your lease renewal strategy and workflows!
>Get Ahead Of It
Sometimes month-to-month leases are a symptom of poor planning. If you're never sure when it's time for a lease renewal, a month-to-month situation becomes your only option until you prepare a new lease agreement and work with the renter to sign it. If a resident decides to move out, you'll have to scramble to find a new resident without a significant vacancy time.
- Property investors look for a property management company with low vacancy rates.
- Reducing your vacancy times starts by reviewing upcoming lease renewals well in advance of their due dates.
- If you're always reacting to the renewal process rather than proactively addressing it, it's time to get ahead.
Review your renewal workflows, and find where your lease renewals are falling through the cracks. If you're not sure what's wrong, a property management consultant can help you recognize the flaws in your workflow, then put solutions in place to fix it!
Create a Flawless Workflow
Documenting your property management processes and using technology ensures you never miss an opportunity to process a renewal on time. Starting the conversation early with your resident gives everyone time to sign on for another year or find a new renter if your resident decides not to renew.
Your leasing process should include:
- A reminder 90 days before the end of a lease term to get these conversations started
- An alert to your resident about the end of their lease term and the opportunity to renew
- A review of the lease, terms, and rental rate to ensure you're maximizing returns.
Make sure your resident understands any changes that will take place with a new lease term. Offer incentives and provide excellent service throughout a resident's lease term to encourage them to renew!
When you plan ahead for lease renewals, you increase your chances of starting a new lease term with a signed, fixed-term lease—either with the same resident for another lease term or a new renter in the property. You also reduce your dependence on month-to-month leases as a temporary aid while you catch up on lease renewals.
>Choose the Right Tools for Lease Renewals
If that sounds like a lot of work—or you're not sure the most effective way to set lease renewal reminders—let a property management company consultant help! Relying on sticky notes or reminders programmed into your phone might not be the best way to stay on top of your lease renewal process. However, tracking your leasing process (and other areas of your property management processes) can help you retain renters and clients while boosting your income.
- The Real-Time Consulting Services team led by Deb Newell can help you put the right technology in place to manage your renewal process.
- We'll help you define your workflows and reduce your reliance on month-to-month leases! A more efficient and effective lease renewal process delights your property owners and residents.
Contact us for a free meeting to find out how we can help you reach sustainable growth!