Tell me the pros and cons of this

[preppy]

My H and I are moving and couldn't sell our house so we are becoming landlords. One of the inquiries wants a 3 year lease, saying she wants to be sure she can keep her daughter in the same school till HS is over. We are planning to try and sell again in a few years when (hopefully) the market recovers. Is this a good or bad idea to sign such a long term lease? Why or why not? Thanks!

[Deleted]

I've really never heard of a lease that long. I find it really odd that she's placing that much demands on you. I would be up front and honest with her and tell her that you plan on trying to sell in a few years and maybe she should 1.) deal with a shorter lease or 2.) rent somewhere else. Keeping her kid in a local HS is not your problem. If she's a shitty, needy tenent, you'll be stuck with her for three years. That sounds like hell.

[Deleted]

What Blessed said

Also, if you're in an area where rents are rising, you will be locked into the current rent for 3 years (for that reason, our landlord currently charges higher monthly rent for 2 year leases than for 1 year leases).

And you won't be able to sell if you decide you want to.

On the plus side, it can be expensive to find new tenants every year, because of advertising costs, cost of the apartment sitting empty between tenants, and the maintenance/renovations you'd do between tenants. So you'd potentially save on those costs.

[dragonfly08]

DH will sign a multi-year lease if he's very comfortable with the potential stability of the tenant. Obviously things can go wrong, but that's true during a 12 month lease, too. Just make sure you've done a thorough check of references, background, finances.

The upside to a multi-year lease is that you know you have a tenant, and you know what you'll get in rent. No issues about rents decreasing in the area as they're locked in. Of course that leads to the first downside...if rents increase you can't ask for more.

Related to that is the fact that you're stuck with that tenant for three years. If they're lousy, pay late, trash your house, that's an issue. Plus, if you decide you hate being a landlord and/or the market recovers and you want to sell, you're on the hook. I don't know that I'd do a 3 year lease 1) the first time I was a landlord, and 2) with a new tenant I had no prior knowledge of yet. Then again, I don't know the market by you so if it's unlikely you'll find anyone else quickly, or you're really worried about finances in the next 2-3 years, it may be worth considering if you've checked her out.

[dexteroni]

Good tenants don't try to trap you into renting to them for three years. If you don't want to renew her lease for whatever reason, a good tenant will be able to find another place in the same school district. I would pass.

[preppy]

I didn't think about not being able to raise rent. I feel like of she is good it would be great, but even though she seems nice and normal and checks out we have no real clue how she would be as a tenant. It makes me a little nervous. Maybe we will go back with a two year lease. We also have other inquiries.

[susieq]

We just had renters sign a two year lease on one of our rentals for the same reason. The biggest pro is not having to rent it every year potentially losing rental income between tenants.
The biggest con is if they are horrible renters it will be much harder to get them out before their lease is up. This was a bigger deal to us b/c this house is next door to where we live. So far they have been really great.

[preppy]

Oct 17, 2012 9:38:31 GMT -5 dexteroni said:

Good tenants don't try to trap you into renting to them for three years. If you don't want to renew her lease for whatever reason, a good tenant will be able to find another place in the same school district. I would pass.

Hmm I didn't think about it that way.

[isabel]

I don't see why she would need a guarantee of a 3 year lease. Our landlord has been happy to have renew the last couple of years because we are good tenants. Yeah, it would suck if he decided to sell or something, but we would just find a new place. There was never any concern for us that we wouldn't be able to live here as long as we like. I'm a little wary of her wanting to sign a 3 year. What's wrong with renewing after 1?

[definitelyO]

you can also build in rent increases in a 3 year lease - just spell out the rent increases on an annual basis with x$ or %. You can also build in language that the 3 yr lease is void and reverts to a 1 yr lease with x number of late rent payments/bounced checks, etc.... I think you can build in stop gaps and checks and balances if you like to protect you.

I can see looking for stability - but who knows what you'll find when you check references and credit history.

[Deleted]

Oct 17, 2012 9:52:32 GMT -5 isabel said:

I don't see why she would need a guarantee of a 3 year lease. Our landlord has been happy to have renew the last couple of years because we are good tenants. Yeah, it would suck if he decided to sell or something, but we would just find a new place. There was never any concern for us that we wouldn't be able to live here as long as we like. I'm a little wary of her wanting to sign a 3 year. What's wrong with renewing after 1?

I can understand why people would appreciate the guarantee of a several year lease if they're renting from individuals who couldn't sell their house and therefore are renting (rather than, say, a corporate landlord). This is of course anecdotal, but I have a friend who lived for 8 years in 2 different apartments in condo buildings (she was renting from the individuals who owned the units) and while she liked the apartments she hated the instability of wondering upon each lease renewal whether the landlord would let her stay or whether this year was the year that s/he would try to sell. Moving is a PITA (and where we live, a particularly time-consuming, expensive PITA), so it is nice to know that you can stay in a place until you want to leave.

[grosnl19]

Our tenant wanted the same thing, but our management firm suggested an alternative that we went with.

We have a 3 year lease with the tenant, but after 2 years we have the option to tell the tenant that we want to move back into the home (we are living overseas) giving the tenant minimum 60 days notice.

[Susie]

I'd probably only do it if the tenant had really good references - I'd ask for more (and have a higher expectation of the quality of the references) for that kind of demand. Plus I'd build in reasonable rent increases. After doing those things, the risk would seem more manageable for the tradeoff of saving advertising/cleaning/possible vacant months between tenants.

Otherwise, I'd pass. If she wants to stay in the same place and it's working out, she could always renew the lease for a 3rd year.

[Deleted]

Oct 17, 2012 9:38:31 GMT -5 dexteroni said:

Good tenants don't try to trap you into renting to them for three years. If you don't want to renew her lease for whatever reason, a good tenant will be able to find another place in the same school district. I would pass.

I disagree. She wants to make sure her daughter (15 or so) stays in the same district, in the same house for the reminder of her high school years. I don't think that makes her a bad tenants. I think she's being realistic of what her needs and wants are. She already knows she's plans on staying for 3 years, why sign a new lease every year if you can just sign 1 lease?

Especially, since you can write in rent increases in the lease. You can also write in that you want to sell the house and if it sells before the lease is up then she has to move out.

Also, if she's being a bad tenant in the future you have landlords rights.

[lovetx]

LOL at this. We just signed a 3 year lease yesterday. My DH is in the military and he is going to the pentagon on 3 year orders. We move enough as it is, so I am not going to move to a house unless we can stay there the entire we'll be in that area.

We are good tenents who take care of the house and have never had any problems renting with mutli year leases. I would give her a chance if she seems normal, etc.

[preppy]

Okay so we talked to our realtor and she said that we can 1. charge her an extra $100/month for the long term lease 2. set it so if she has any late payments over 15 days it will default to a 1 year lease automatically. With those provisions I am thinking it would be good, we won't have to pay the realtor to find renters again next year and the year after.

[gtkim]

We had military renters who wanted to be able to stay longer as well.
We wrote a one year lease with automatic renewal on a month to month basis unless one party or the other opts out. If she turns out to be a crappy renter you have an out. If she is good, she can stay.
We also had a provision in our lease that during the last 3 or 6 months of our tenant living there we could put the house on the market and they had to make a best effort to keep it in showing condition, work with the realtor, etc.

[CloudBee]

I wouldn't lock myself in for more than a year with them. You never know what can happen with finances on their side or yours. I would be nervous.

[CloudBee]

Oct 17, 2012 11:56:56 GMT -5 preppy said:

Okay so we talked to our realtor and she said that we can 1. charge her an extra $100/month for the long term lease 2. set it so if she has any late payments over 15 days it will default to a 1 year lease automatically. With those provisions I am thinking it would be good, we won't have to pay the realtor to find renters again next year and the year after.

I like the 15 day provision. However, what if they're really annoying, demanding, etc? This is a business relationship that could last 3 years, and you don't know her.

[Deleted]

What if she has good references?

I don't think 3 years is unreasonable, especially if there is a built in schedule of rent increases. I wonder if there are any other protections that could be built in to get you out of a 3 year lease if she really sucks.

When I was in college, my landlord sold the house I rented to new landlords (thankfully not a family that wanted to move in!). It sucked because the new landlords raised the rent by a LOT, and almost made me move out because I had pets (even though pets were allowed with my original lease). I also had to pay a higher deposit, cleaning deposit, and sign on for another year at that point. Otherwise, I would have had to find a new place within 30 days and move unexpectedly, which would have cost me a new deposit, moving expenses, time, and the risk that I couldn't find another place that quickly that allowed dogs.

I think trying to avoid that kind of situation is smart on the renter's part, especially given that she wants to stay until her daughter is done with HS and knows you want to sell your house. I don't blame her for not wanting to move 2-3 times during that period and without a 3 year lease, you could force her to move.

[birdmom]

I signed a 2 year lease with my tenant originally. I had to, however, because she receives financial assistance from the government (Section 8). Talk about being nervous (Section 8 tenants are notorious for being not-so-great tenants in our area). She has turned out to be the best tenant that I ever had. At the end of the two years, I gave her $100 off her rent to sign another two year lease. I didn't want her to leave.

I realize that this is a different situation. I am guaranteed the money from the government monthly, and if she doesn't pay her portion, she loses her voucher, and she was on a waiting list for 7 years to get it. You better believe that check is in my mailbox on the 3rd of every month!

Maybe she would sign a one year lease, and then at the end of that year, evaulate and resign for two years when you know what kind of tenant she is?

[preppy]

You have definitely given me some great insight here, I will be printing this out to show my husband so we can decide tonight.

Thank you so much for all the advice!!

[Deleted]

I also think if she knows you are a private renter who couldn't sell she wants to make sure that you won't come back in a year and she wants to renew and you say sorry, we're selling. Then she doesn't even have the option - the 3 year guarantees that for her. That said, I'm still not sure I would want to have the same renter for 3 years not knowing if they were a good renter or not. Could you do like a 6 month or 1 year trial w/ then the option to extend to 3 years?

[ddi741]

Does she have any interest in purchasing the home? You could do a lease with purchase option where she puts X% down as a non-refundable down payment and then a 3 year lease. Your lease still has all the caveats regarding late rent, terms & conditions where you could evict her etc. But after 3 years if she doesn't want to buy you keep the down payment and she moves out.