How do you structure 1 year lease vs 2 year lease?

Question

In a couple of months my first two SFH's will be ending their first lease term.  I'm curious to hear from more veteran LL's....how do you like to structure your lease agreements?  Month to Month?  1 year at 3% increase?  2 year at 5% increase?  Etc...  Why do you structure that way?

Milton Rivera · Answer

@Jeff Duford

One way to structure in a single lease agreement:

• You will have a baseline lease say one (1) year.  Depending on local laws, the tenant/landlord must give the other party certain notice - 60-90 days before the lease expires.  An auto-renewal clause can be in the lease with a percentage increase (say 2- 5%).  If you do not receive any notices, then give the tenant at heads up the rent will be increasing to $X on date Y. The auto-renewal clause can be exercise a couple of times (say three years in total).   This will ensure that you keep the property occupied and also take advantage of rent increases.  
• At the end of the final auto-renewal year, you can let the lease go to a month to month term.  Notify the tenant of the new terms (month to month, rent rate and notice requirements).  This allows you again to keep the property occupied and take advantage of rent increases.

If you find a good tenant, you want to make sure you keep them as long as possible and make it easy for them to stay (hence the auto-renew). They can always call you as the lease expiration approaches in case they want to ask for concessions (free rent, carpet steam cleaning, etc.)

Good luck,

Milton