How long should we ask tenants to sign a lease for our rental property?

12 Replies

Wondering if my husband and I should ask for more than a one year lease for our duplex...both units are now occupied... for a 1 year lease...but should we ask for a 2 year lease instead?

Thank you

Victoria 

@Victoria Silva  

Do you see any advantage in a 2 year lease?  

If I'm going to sign a longer lease I'm going to want a discount of some kind.  $1000/month for 12 or $950 for 24, something like that.

You can't raise their rent for 24 months, which may or may not be a problem.

Do you have a lease breaking fee?  Can you legally take it out of their security/last month's rent?

Personally I don't see much of an advantage, but my knowledge of the Houston market is limited.

Aaron...Thank you good points for us to consider.

Thank you

Unless you have some auto-triggers in your lease with regard to increases in rent or utility coverage (if paid for by the Owner) then a 2yr lease may not be a wise decision.

You also want to stagger your leases so that both are not coming up for renewal at the same time (I like a min 3mth stagger).

1yr lease gives you flexibility to rid nuisance tenants, slow payers, increase rents, etc. 

If you are in a 2yr lease, then you have to wait longer to address those issues.

The eviction process is the same regardless of the length of the lease agreement.

If you are worried the tenants will move out and not renew, then maybe there are other issues not being disclosed that are relevant to your inquiry..lol

Unless you are dealing with Commercial Tenants, then a 1yr lease should be fine.

Happy Landlording!

Thank you...no there are no problems...I am just wondering...and asking questions.

Thank you

the first lease I only do a one year lease. I have been burned to much with a longer that it's not worth it. At renewal if they are a good tenant I will offer a 2 year lease at half of the increase of a 1 year lease. This way I lock in a longer lease and the tenant has proven themself. I always increase it a little so it doesn't get below market. 

This strategy works for me because I have a break lease clause. So if they decide to break their lease I am compensated!

Originally posted by @Elizabeth Colegrove:

the first lease I only do a one year lease. I have been burned to much with a longer that it's not worth it. At renewal if they are a good tenant I will offer a 2 year lease at half of the increase of a 1 year lease. This way I lock in a longer lease and the tenant has proven themself. I always increase it a little so it doesn't get below market. 

This strategy works for me because I have a break lease clause. So if they decide to break their lease I am compensated!

We do exactly the same as Elizabeth.

Nobody wants a new nightmare tenant locked in off the bat, but if they have proven themselves, hell yeah, get them to roost!

Good thing about a 2 year is that you don't have to deal with the turnover costs and potential vacancy if the tenants leave after 1 year. One month of vacancy can easily wipe out a year or more of rent increases that you were planning.

Of course, there's the risk that they're difficult tenants and you're stuck with them for 2 years, but if you have it managed through a property management company, then they're the ones dealing with the tenants, and not you.

Originally posted by @Yishi Garrard :

Of course, there's the risk that they're difficult tenants and you're stuck with them for 2 years, but if you have it managed through a property management company, then they're the ones dealing with the tenants, and not you.

But unfortunately, you're still dealing with the fall out financially as they pass it all along to you.

The sweep spot is really getting a tenant to that 5 year rental with you. As a landlord there is reasonable wear and tear to a property and at about that 3 year mark your security deposit really can't be used to recover those wear and tear issues that a tenant will typically put on the property. If they rent if for that first year and you have to repaint the place after they move out you could recover the cost through their security deposit, but after 2 or 3 years you won't stand up in court as the judge would side with the tenants that the repait would be considered wear and tear. So getting a tenant signed up for that next 2 year lease taking them out to 5 years or beyond really maximizes reducing your maintenance costs with turn over.

Some people will do a 6 months lease. Its almost like a test lease. Come in and inspect at 6 months and if everything has been smooth and your property has been well taken care of, sign them up for another 6 months or a year. This is the strategy I am going to use on my next lease. 

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