What is a Month-to-Month Lease?
A month-to-month lease is a rental agreement that automatically renews each month until either the landlord or tenant provides written notice to terminate (typically 30 days, though some states require 60 days). Unlike a fixed-term lease that locks in terms for 12+ months, a month-to-month agreement provides maximum flexibility for both parties.
Month-to-month tenancies commonly arise in two ways: the landlord and tenant agree to month-to-month terms from the start, or a fixed-term lease expires and converts to month-to-month under state law or lease provisions (called a holdover tenancy).
Pros and cons for landlords
Advantages: Ability to adjust rent with 30-day notice (subject to local rent control laws), flexibility to terminate for property sale or renovation, no obligation to maintain an unsatisfactory tenant for the remainder of a long lease, and the ability to convert to a fixed-term lease at any time by offering a new lease agreement.
Disadvantages: Income uncertainty (tenant can leave with 30 days notice), higher turnover risk and associated costs, difficulty securing financing (some lenders prefer fixed-term leases on rental properties), and the perception of instability when selling the property.
Month-to-month and property sales
For investors planning to sell, month-to-month leases offer the flexibility to deliver a property vacant to buyers who want to renovate or occupy. For wholesalers dealing with occupied properties, the lease type affects the deal. A property with a long-term lease in place is attractive to buy-and-hold investors. A property with a month-to-month tenant is more appealing to flippers who need the property vacant for renovation.