One or two year lease???

9 Replies

Ok, so I close on my first buy and hold property next week. I know typically length of leases are one year. However, I know three different people that have gone to two year leases. They say this is due to the fact of the cost it takes to get the house move in ready when someone moves out(usually and hopefully paint and carpet). So do you guys think the two year lease is a good idea or do you think it would scare would be renters away?

The length of a lease has no bearing on how long a tenant will stay. They can leave whenever they choose and you are stuck finding a replacement. Long leases tend to protect the tenant not the landlord.

If you have a good relationship with a tenant M2M is all you need, if you have a bad relationship M2M is even better. 

Personally, I preferred month-to-month tenancies.  That way you can get rid of a problem tenant with 30 days notice.  You can also write into the lease that you won't raise the rent for 2 years, or whatever, as long as rent is paid on time, etc.

Otherwise, you could end up held hostage by a bad tenant.

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Hi Kevin,

Congratulations on your first hold property ;). 

Two years for a tenant you don't know* very well (yet) might be too long. After their first year, if you like them, only then I would decide if I want them on my property for two more years or not. You can state in the lease under the two year option that the rent will not increase to persuade them to sign for two more years. I don't currently own any properties but when I do, I will only offer one year at a time. I look at it like this: a lot can happen in a year, but even more can happen in two. 

Also, if you consider a nice pergo or something you won't have to worry about replacing carpet. You can even suggest rugs to your tenants and decrease the security dep. by a few dollars for having one in every room. 

Back when I was renting, two years would have scared me away for sure, and I was a model* tenant every time. 

Hth. :)

Originally posted by @Thomas S. :

The length of a lease has no bearing on how long a tenant will stay. They can leave whenever they choose and you are stuck finding a replacement. 

I don't know why you keep saying this, it isn't true. Technically, yes, they can leave whenever they want, but, if they break the lease there will be consequences. Most sensible people will realize if they are on a one year (or even ten year) lease, they probably shouldn't leave early or bad things might happen.

I know it's not the same but I have a commercial tenant who skipped out on a 2 year lease, I sued him and now he's making payments on over $25,000 he owes me. In a residential lease the landlord would be allowed to collect however many months it takes to find a new tenant.

As to the original question, I would stick with one year leases. Both month to month and 2 year leases will scare tenants away. Most people like knowing they will be in their house for at least a year, they do not like moving any more than you like finding another tenant. A smart tenant will avoid a month to month situation knowing it can only benefit the landlord. Most landlords charge higher rents for month to month tenants also, because they have a higher turnover.

@Thomas S.

I have to disagree. In my market I would have a hard time finding a new tenant anytime from September-April. It is the summer months that are full of action. That is why I wouldn't do a month to month.

I have had a few instances of a tenant wanting to move out a month or two early. When it worked for me I released them no problem, but when it didn't I held them to the full term of the lease (or until I could get it rented) and they paid. Keep in mind I'm dealing with higher end rentals and tenants that are not the "rule breaking" type.

Another point, people who are looking to rent a house for nefarious uses, like growing weed, making meth, or selling coke, will usually look for month to month rentals.

I know, I know, you think you can screen for that, but you can't. Yeah, they do it in high end rentals too...they are less suspicious that way.