Tenant wants a longer lease | Stability/market rent tradeoff
Category: Leasing
8 replies
Original post
Hi all,Current scenario I'm in: I have some tenants who have been living in my unit for about a year now. They've been great tenants by any definition. Because of this, I offered them several different renewal options, including a 15-month lease at their current rate. They emailed to let me know they'd like this option, but then followed up to ask if I'd allow an even longer lease at that rate (2-year lease).
Because they're great tenants, I'd theoretically love to renew with them for as long as possible. But at what point does the stability / market rent tradeoff really start to matter? I'm worried that if I keep them at their current rate for too long, market rent will drastically change in that period.
Reply by Jaxon Patterson
Have you run the #s with some kind of pro forma-like spreadsheet? I would try to estimate how much rent you could miss out on in the next couple years and see some rough math on the tradeoff. I personally don't do anything but 1 year leases, but I also have rentals in mostly high-demand areas, so I'm rarely in danger of not being able to find new tenants that are reliableReply by Marc St.James
I think the stability is worth something especially if they've been as good as you say. Personally, I'd probably run the numbers like Jaxon suggested and see what the difference could realistically be over two years.
If the market is pretty stable in your area I'd be more comfortable locking them in. If rents are climbing quickly I'd probably lean toward a shorter renewal or at least negotiate the rate a little for the longer term.