We’re almost upon that time of year when leases begin expiring en masse. Indeed, 75%+ of leases turn over between April and September, creating a season of angst and uncertainty for even the most seasoned renters.
Like the renewal of life that comes with spring, ‘tis the season when renters either renew their leases or pound the pavement in the hunt for new dwellings. Whether you are looking to stay put or make the move, should you sign a one or a two-year lease in this market? Two-year lease terms come in 3 flavors:
1. Best: You get the first year rate locked in for the two years
2. Worst: You get a higher rate starting in year one over the course of two years
3. Middle: You get the first year rate for the first year and a pre-agreed upon rate for the second year
Option 1 is clearly the best for the tenant, as you’re freezing today’s prices into tomorrow. This will likely happen if the landlord values stability over profits and would rather not be bothered with the whole process again next year.
Option 2 is best for the landlord, as he’s locking in tomorrow’s presumed prices today. The only reason you would do this is if you absolutely, categorically want to guarantee you won’t have to move in one year’s time and are willing to pay a premium for that certainty (or it’s a killer deal to begin with).
Option 3 is what you’ll most likely get today. This is because we are in a very robust rental market that shows no signs of abating, with year on year rent increases of 5-7%. In this situation, you are betting that the market will increase by more than the increase in your lease, otherwise it’s not worth signing.