I’d bring it to market rents. You took a 1,200 lose by giving 50 dollars off. Maybe do a half bump the first year and a bump again the following year.
No reason to be that far below market value.
First, I only recommend keeping rent low for PROVEN tenants. In your case, you have two years of history to demonstrate they are worth keeping.
Second, I would bump the rent but maybe keep it 10% below market. You could bump them to $1,800 which saves them $2,400 a year and costs you $2,400 a year. That's worth having a high-quality tenant and it should be worth it to them to avoid moving, paying more, or potentially winding up with a nasty Landlord.
If there's even a chance they would cry over an increase, be prepared to show them comparables, the value of staying with you, and how much you are losing by keeping them at the lower rate.
Continue with them on a M2M lease. They have proven themselves and do not need a term lease.
Raise there rent to market if you are operating a business, give them a discount under market, if you are operating a charity.
Whether a tenant is good or bad is irrelevant, they are all expected to be good and expected to pay market rent...that is what market rent is.
Business or charity it is your decision alone. They pay you to rent or you pay them. What is it to be.
@Allan Calderon how did you determine market rate is $2,000 a month? Use that evidence to demonstrate the value to the tenant and justify your increase.
I would not sign more than a one-year lease. I also would not do a month-to-month because I prefer some stability. Yes, they can still try to leave before the year is up but I have policies to reduce my risk and loss if that happens. If you rent month-to-month, you get 30 days notice any time of year with nothing to mitigate your risk.
There's a big difference between "charity" and offering a discount to reward good customers. I can't think of a single major, successful business that doesn't offer discounts to customers and clients.