Author Topic: Two Year lease?  (Read 299 times)

en58

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Two Year lease?
« on: September 13, 2017, 06:29:04 AM »
Hey guys,

So we have tenants who have asked for a 2 year lease. They have been great tenants this year, with no issues. Do you guys think we should renew a two year lease or just do it yearly?  Also, I was advised to raise the rent by $25 dollars, do you guys think this is a good idea?

Fishindude

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Re: Two Year lease?
« Reply #1 on: September 13, 2017, 06:33:57 AM »
If they are good tenants, take good care of the place, and the current income from rental is currently working for you I'd do it, leave rent rate the same and be happy about it.

Drifterrider

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Re: Two Year lease?
« Reply #2 on: September 13, 2017, 08:01:23 AM »
What percentage of the rent is $25?

They want to lock in a price.  You want to lock in a tenant.  Were you planning to sell your house in the foreseeable future?

v8rx7guy

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Re: Two Year lease?
« Reply #3 on: September 13, 2017, 08:38:04 AM »
From a landlord that has had good tennants and awful tennants... the $600 difference over two years is CHEAP when it comes to the headaches you can get from a bad tennant.  Lock them in at their current rate for two years and be happy.  But, tell them that rent will be raising rent after the two years.

en58

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Re: Two Year lease?
« Reply #4 on: September 13, 2017, 09:15:56 AM »
The current rent is 1500 but we could get 1700-1800 for it. We are not looking to sell.
What percentage of the rent is $25?

What percentage of the rent is $25?

They want to lock in a price.  You want to lock in a tenant.  Were you planning to sell your house in the foreseeable future?

SuperSecretName

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Re: Two Year lease?
« Reply #5 on: September 13, 2017, 09:19:28 AM »
Absolutely raise the rent 25.  If you don't now it will be harder to in the future.  They aren't going to move over $25.

Leases terms are more of a suggestion than ironclad.  You don't want a tenant in your house that doesn't want to be there.  I'd go for the one year lease.

srad

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Re: Two Year lease?
« Reply #6 on: September 13, 2017, 09:23:35 AM »
You can also do a step up lease.  Maybe keep the amount the same this year but bump it up 30 next year.  Personally, i raise rents every year.  Not enough to make them move but it will be somewhere between 1 and 4%.  Really depends on the situation.  I have a few rent increase notices i'll be sending out next month.  I'm going to be between $10 and $20.  That increase is tiny as rents are between 850 and 950.  These units will need some updating when they move and i'd prefer to put that work off for a year or two...  hence the small increase.  10-20 a month per unit adds up over time.  And who is going to move over a $10-$20 increase?   

Oh, and my nice A class properties will be getting a much larger increase this year.  The city they are in passed a school bond that will increase my taxes a few hundred.  All my tenants in this city have kids so i know they voted yes for that bond,  i'm at least getting that increase into their rent, plus a little extra for me. That will be around a 6% increase for them.  (I actually voted yes for this measure too, my wife on the other hand cancelled out my vote by voting no, that's a whole other discussion...  save money or be around stupid people!) 


nereo

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Re: Two Year lease?
« Reply #7 on: September 13, 2017, 09:26:12 AM »
From a landlord that has had good tennants and awful tennants... the $600 difference over two years is CHEAP when it comes to the headaches you can get from a bad tennant.  Lock them in at their current rate for two years and be happy.  But, tell them that rent will be raising rent after the two years.
+1.  A single month of vacancy wipes out any additional income you'd get over renting it at $1,700.  As long as the underlying financials are solid (i.e.you are turning a profit) I'd take the vetted tenant at the discounted rate.  If you can get htem to agree to a $25 increase even better.  I write into all my leases that the price will increase 2-3% (2% on 1500 is $30), which counteracts inflation.

One additional thought: have you asked them why they want the 2 year contract?  For some it may be locking in a great rate.  Others are more interested in not being forced to move.  Which of these is driving their decision could indicate how much they would be willing to pay for a 2yr lease.
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cchrissyy

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Re: Two Year lease?
« Reply #8 on: September 13, 2017, 10:39:10 AM »
I agree, keep the good tenants!

I would step up the rent a bit more though. If your house is renting below market price they will probably still be happy  with the deal if you say rent is going up, oh, $50/m this year and another $50/m in the 2nd year.

en58

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Re: Two Year lease?
« Reply #9 on: September 13, 2017, 11:38:04 AM »
Thanks for all the input guys.  We decided to increase the rent $25 dollars. I will let you know what the tenants do.

Drifterrider

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Re: Two Year lease?
« Reply #10 on: September 14, 2017, 10:40:00 AM »
The current rent is 1500 but we could get 1700-1800 for it. We are not looking to sell.
What percentage of the rent is $25?

What percentage of the rent is $25?

They want to lock in a price.  You want to lock in a tenant.  Were you planning to sell your house in the foreseeable future?

Based on those numbers, $25 is reasonable (inflation) and unlikely to force them to move.  Some landlords are reluctant to raise their rents annually and either find themselves well below market rent and having to increase the rent a lot (causing a new tenant) or just taking that loss.