Does a tenant on a month-to-month in a small multifamily hurt the assignment fee or is it priced in already by buyers

$18k on one unit out of seven does read like a negotiating move dressed up as underwriting, but I wouldn't bet on that being the whole story. Commercial buyers on small multifamily do actually model the month-to-month as a vacancy reserve, usually one to two months' rent on that unit, plus a light re-leasing cost, and then they cap-rate the whole thing, so a $1,200/month unit in a 7-cap market is maybe a $4-5k real hit, not $18k.

What market is this in, and what's that unit renting for? Because if it's your highest-rent unit, the math shifts a little, and if the buyer already knew rents were soft relative to the others he might be burying a broader repricing in the month-to-month story.

What I would actually do is get a signed lease renewal from that tenant before the next conversation, even at current rent, even if it's just six months. Kills the objection completely and costs you nothing but the conversation.

Both things you described are happening, and they work in the same direction even when the buyer is also posturing.

Commercial buyers on a multifamily deal value the property based on its income stream. The shorthand they use is the capitalization rate, usually called the cap rate. It is annual net operating income divided by purchase price. When income feels uncertain, they lower their projection for that unit, which directly drops what they will pay.

A month-to-month tenant represents a specific risk they have to model: the unit could go vacant tomorrow with 30 days notice. On a 7-unit building, that one unit is roughly 14% of gross income. If the buyer assumes, say, a six-month lease-up period to re-tenant at market, and the unit rents for $1,200, that is about $7,200 in lost rent before you add any turnover costs. The $18,000 haircut is bigger than that math, which is what makes me think the buyer is also using it as a renegotiation lever. Both things can be true at once.

The thing worth knowing before your next conversation: tight vacancy in the submarket is relevant, but professional commercial buyers will want to see data, not just your read. If you can pull actual vacancy stats for that zip code and show comparable units renting quickly, you can push back with something other than instinct. The strategy guide for commercial wholesaling makes this point in a few places: your end buyers underwrite on income and evidence, and a well-supported deal assigns more cleanly.

The three-year tenancy is genuinely a positive data point. A long-term resident who went month-to-month is different from a new tenant on month-to-month, and you can frame it that way.

One thing I'd confirm with a local commercial broker: what the actual lease-up time is for a comparable unit in that submarket right now, since that number changes the model significantly.

What does the rent on that unit look like relative to current market rents for the same unit type?

The $18k discount is probably real math, not a negotiation tactic, and here is the mechanism: a commercial buyer underwriting a 7-unit is likely capitalizing income at a stated cap rate, so if that month-to-month unit sits vacant for even 60 days during a turn, loses a rent bump on renewal, or requires a concession to retain, the income hit gets multiplied by whatever cap rate they are using. At a 7 cap, a $100/month rent haircut on one unit is worth roughly $17k in value, so the buyer's number is internally consistent even if it feels aggressive from your side.

The part nobody has named yet is the lease audit risk underneath the month-to-month status: some buyers assume month-to-month means the original lease terms are murky or in dispute, and they will discount not just for vacancy exposure but for the cost of a potential move-out fight if they want to reposition that unit later, especially in a market with any tenant protection ordinances on the books.

What rent is that unit currently paying relative to the other six, and do you have the original signed lease in the file?