Is It Beneficial for Landlords to Collect Rent on Monthly Basis?

The investment on a rental property goes wrong when you find long vacancies. It is definitely not the desire of a property owner to see his property vacant. Rent collection is one of the toughest things to do while managing the property. This is the true outcome hence one cannot ignore it as well. 

If you are looking for an effective means of rent collection, you can always hire a property management company. But, it should be your responsibility to fix the way of rent collection. There are many landlords who believe renting out their property for a longer period of time on lease. 

Whereas there are few who think that monthly rent collection is the best way. Most landlords rely on term leases to keep renters in place for a set period of time; but would you and your residents benefit from an alternative arrangement? Before you decide on the mode of monthly payment, we are here telling you few of the considerations you can take. 

Consideration #1: Is Eviction Likely ?

Term lease is definitely good choice because it assures you for longer occupancy in your rental property. But, in the meantime it will keep them at a place and there are more chances of them being flexible in payment, because they know that you are not going to evict them during the tenure of contract or lease. Month-to-month agreements enable both parties to terminate the lease–so if you’re having trouble screening out risky residents; they’re worth considering, especially in a market with strong demand for rental units. So yes, if you will have a month-to-month collection process, it will make eviction easy for you. This will save you from the complication that you might face if a tenant is on lease in your property and not paying rent on time. This will save you from the legal issues too.

Consideration #2: Do Residents Need Flexibility ?

If you have temporary tenants then it would be good for you to be flexible for rent payments. The temporary tenants such as students, long-term business travelers, military families, or couples shopping for new homes, can be good prospect if you want them to occupy your property for a shorter period of time. Additionally, if you work with less financially stable residents, a month-to-month lease provides a safeguard for both parties: The resident can move out if their plans change, or you can evict them if they stop making payments. So yes, if you are dealing with such kind of tenants then you would be better saved by the monthly rental, rather than giving it on lease for a longer period of time. 

Consideration #3: The Period of Lease

You have to consider when the lease will end. If you are leasing out your property for a particular period of time then you have to consider when it will end and have to plan for the things accordingly. If your lease will end up in a slow month like when there would be fewer chances of occupancy then how you are going to manage. This becomes tough. If so, it might be smart to use a 6 or 9month lease rather than defaulting to a year. 9 month agreements also make sense for students, eliminating the need for sub letters during the summer months. So, whenever you are preparing for lease, make sure it ends up providing some certain benefits to you as well. 

Consideration #4: Are Rent Cost Fluctuating ?

You have to consider the fluctuating rate of the market while you are thinking to lease your home to someone. When you are leasing your property then you will get a fixed amount only whereas when your property is on monthly rental, then you can change the rent as per the industry. It has both positives and negatives. With a month-to-month lease, it’s easier to change the terms of the agreement–including adjusting the rent as the market shifts. In addition, month-to-month leases generally have elevated rents to compensate for the risk of a sudden vacancy. You can also choose to keep the rent at a stable rate, giving the tenant the financial security of a term lease, while preserving your right to evict at will. 

A Final Takeaway

Both the systems have their own pros and cons. You are supposed to analyze it accordingly and then come to a conclusion for the same. It’s important to update your leases periodically to make sure that they still benefit you and your renters. You invested your money because you want to earn something out of it. It will happen right only and only when you will have a proper set of action to be followed for the same. 

If you have a property management company in Maryland then they will regularly analyze the rents and would make sure you get best benefited by the same. But, in case you don’t have some professional’s assistance then you will have to monitor things by own. In such a case, it is better to have a month-to-month rental.