Should I sign a 2 year lease?

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Real Estate (69)
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Should I sign a 2 year lease?

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Question:

I own several single family residence homes and rent them out. A tenant has approched me, asking for a two-year lease. Should I offer two-year leases?

Answer:

Speaking as a landlord myself, personally I prefer a month-to-month agreement. Although when rents are squishy I will ask for a 6 month initial lease before it converts to a month-to-month. The sad fact is, tenants will leave when they want to leave. Sure, you can take their deposit and make them pay rent until another tenant rents the place. However that is not worth the valuable choice I have to raise the rents or change the rules whenever I want with only a 30 days notice. In fact I have been able to use those options to get rid of poor tenants when needed. But if they remain good tenants, you might sign them up on a year-to-year basis, allowing you to raise the rent/change the terms on a regular basis if needed. If you put in a clause that states you automatically raise the rent each year due to typical tax increases, inflation, improvements, etc., lease or no lease, a lease will probably become less important to them.

The summary is, if it is a good tenant then it will not hurt you to sign a 2 year lease. Otherwise the extended lease ties up the landlord - it reduces your choices. A landlord does not benefit from a long-term lease.

Comments:

2007-05-11, 16:47:21

anonymous

R. Starr from Oakland said:

'When I took a real estate management course from an attorney, I learned about the problems with leases in CA. The renters are not penalized for breaking them, but the owner can’t get the bad renters out until the end of the lease. So, if there is no legal benefit to you of leases, it comes down to a possible psychological benefit, as already mentioned. Not knowing your renters, I can’t judge their psychology.'

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