SFH lease over > 1 year

[Henry Nguyen]

Hi everyone,

My tenant wants to renew for 4 years, which align with her children high school tenure (i.e. they start high school next school year 2023). I just want to take a survey as to how much (i.e. % increase from current rent of $2,200) and how often (i.e. every year). This is for a SFH 4/3 ~ 1,800 SF in a nice community with man-made lake in Chandler AZ. Thank you for your help.

[David Shakhunov]

Hello.

There are few ways to approach it.

1. I would look at the historical prices for the increase. 

2.You can go to rentometer.com and see what are the approximate rents for you locating in the last 12 months vs 24, vs 36 vs 48. Based on that you can see the percentage increased and use the same one. 

3. Agree on some kind of publicly available inflation rate index, consumer rate index, etc and use that as the increase. 

Also I would check your state and local regulation about rent increase regulations. 

[Bill Brandt]

I’d go with nice round numbers…

Either 

2200-2300-2400-2500 (4% per year give or take)

2200-2350-2500-2650 (6% give or take)

2200-2400-2600-2800 (8% give or take)

 The problem is I think most renters don’t realize how much rent has increased when they’re only looking forward or back one year. This might make it obvious how expensive it’s going to get. But you could always pick one of these options and say anything from 1-4 years is available at these rates, pick one. 

The big downside to renting it being given 30 or 60 days to find a new place, pack and move, maybe when you have school, work or vacation plans. Some people will pay for stability. 

Maybe a better way would be to just average the amounts out and offer a fixed rate for the entire length so if they bailed early you actually do better. Take the last option as an example. Turn it in to…

1 year 2200/mo

2 years 2300/mo

3 years 2400/mo

4 years 2500/mo

You end up with the same money except it’s front loaded and the increases don’t seems as drastic. In fact I convinced myself, that’s how I would do it. Good luck. 

[Bjorn Ahlblad]

Personally I would never do a lease that long under any conditions. One year is max for me, things change, people change. Stuff happens.

[Galen Ikonomov]

Exactly what Bjorn said. 1 years lease, 4 year lease it don't matter if it is the same tenant. You just have to renew every year which takes 1 minute.

Imagine we have the same scenario that has happened in the last 2 years and then you are stuck with increasing the rent only so much and way below inflation rates. What would happen if the tenant suddenly loose it or ex-husband shows up and messes up everything? You are stuck in a long lease and potentially you have to evict.You get the idea.

 Stick to 1 year and renew every year and raising the rent by the market conditions.  

To share with you,  I am in the same situation as far as the tenants wanting to stay longer. They want to stay 2+ more years and asked me if the next lease could be longer and I told them no, but if the tenancy is the same as it has been ( taking care of the property, lawn, etc. ). I am going to keep renting to them.

[Debbie C.]

@Henry Nguyen

It sounds like the tenant wants the 4 year lease. They have nothing to lose, you do. I have very nice homes in good areas in Scottsdale that I rent out, and I know in Arizona there are very few things you can evict a tenant for. The tenant can break the lease anytime and you are limited to what you can charge if the lease is broken. As @Bjorn Ahlblad mentioned, things can change, good tenants can start to cause problems. They already live in the house and sound motivated to stay. Just be sure this is what you want to do.

As far as what to charge, if you decide to go ahead, the 100.00 increase per month, for each year of the lease is a good suggestion. 

Good luck on whatever you decide.

[Doug McVinua]

@Bjorn Ahlblad , I run the same way, one year at a time. Always plan for the best, plan for renewal, and plan long term but leave yourself an out just in case something changes.

[Andrew McGuire]

@Henry Nguyen I don't know how that benefits you with that long of a lease, there is not shortage of good tenants and would hate to see you miss out on  potentially exploding rents like we've seen. If inflation keeps up the way it has you actually lose money by only increasing your rents 4-8% per year.