Signing a multi-year lease can be an excellent option for both the landlord and the tenant. However, signing a multi-year lease comes with its own baggage.
Pros & Cons of Signing a Multi-year Lease
Pros
ForLandlord
1. Minimizes the Turnover Expenses
When a tenant moves out of the house, money will also move out of your pocket. For example, to get a new tenant in your property, you’ll have to market your property, call listing agents, do repairs and painting, and so on. And all these will need a significant amount of money, which will reduce the turnover. Besides, finding a suitable tenant for the property isn’t an easy task. Sometimes, your property will remain vacant for months, and it means more losses.
But when you sign a multi-year lease, you won’t have to pay for all these expenses every year. Eventually, your yearly turnover will be increased and have a higher return on investment.
2. Fewer Dents
Usually, most wear and tear happens when a tenant moves in and moves out of the house. It’s obvious that when you sign a multi-year lease, your tenant will be locked in for a couple of years and won’t move out of your property any time soon. As a result, your property will have less wear and tear and save you money each year on repairs and paintings.
For Tenants
1. Cheaper Rents
Trust me; most landlords want to have a long-term tenant. Because as I mentioned earlier, finding a new tenant needs a lot of time andinvestment. That’s why most landlords offer a discount on rents for signing a multi-year contract. But when you sign one yearlease,your rent is more likely to increase every year. If you have limited earnings or want to save money, this can be an enormous burden on you.
2. Less Stress
Finding a new suitable house every year isn’t always easy. Besides, when you change your house every year, it’ll cost you more bucks. For example, you’ll have to spend money on application fees, packing furniture, security deposits, and so on. And all of these will give a lot of stress.
But when you sign a multi-year lease, you won’t have to worry about all these for at least a couple of years.
Cons
For Landlord
1. Lower Rents
When you sign a multi-year lease with the tenant, you’ll be locking in rent for three to four years. If your property is in a competitive place like New York or San Francisco, it may hurt you financially. Because in these areas, rent usually goes up every year, and when you sign a multi-year lease, you won’t be able to increase the rent at all.
For Tenant
1. You Simply Cannot Change Your House
Let’s say, while signing the multi-year lease, you had a great job in San Francisco, and you thought you had found your “The Home.” But after a couple of months, you have lost your job, and you’ll have to move to another city or state to find another.
When you sign a multi-year lease, you simply cannot change the house and move elsewhere. You’ll have to follow some procedures, and, in some cases, you’ll have to pay some fees to the landlord for breaking the contract. This can create a problem if you unfortunately fall into the situation which I mentioned above.
Disclaimer: Speak to an attorney before renting with a multiyear lease or signing a multiyear lease. There are different requirements for 12-month leases vs multiyear leases.
