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Updated over 5 years ago on . Most recent reply

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Roma Montifar
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Any pitfalls with a 5 year lease?

Roma Montifar
Posted

We have tenants that are coming up to finishing their 2nd year with us. So far we’ve had a great experience with them, and they love the house, neighborhood and service we provide.

We’re replacing the shower/tub combo in the master bath to a walk-in to make it easier for them to get in and out. After letting them know that we’ve decided to give them the walk-in shower that they asked us for, they brought up committing to a 5-year lease.

What are some pitfalls to keep in mind with long lease agreements?

So far on my list:

1. We cannot raise the rent. (We likely wouldn’t raise rent anyway since we’re cash-flowing and would like to hold onto these guys for as long as possible)

Most Popular Reply

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126
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Ryan B.
  • Investor
  • Indianapolis, IN
141
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126
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Ryan B.
  • Investor
  • Indianapolis, IN
Replied

On my multi-year leases, I specify that there will be rent increases each year... Usually $25/month more in the second year, another $25 in the third year, and then it coasts there, but each side can decline to renew after the third by giving 90 day notice.  Thus, I'm getting my rent increases.. and if the rent is out of whack with market at the end of the term, either can opt out to renegotiate.

If you'd ever want to sell the property, a 5-year lease would clearly encumber such a sale.

That said, if you likely wouldn't increase rent anyway and you want to keep them as long as possible, go for it. 

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