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One-Year Leases Are Generally Better Than Two-Year Leases

Posted by Mark Smith on September 28, 2000 at 11:54:01:

In Reply to: I disagree posted by Kerry on September 28, 2000 at 04:45:40:

I've written about this before in other threads.

Comparing a series of one-year leases (with a 2% increase) vs. a series of two-year leases (with a 4% increase) over a 20-year period, the monthly rent at the end of 20 years would be less than 1/2% higher with the series of one-year leases.

However, over that same 20-year period, with the two-year leases, you would have paid the 4% increase in each of the two years of a two-year lease, whereas with the one-year leases, you would have paid a 2% increase in the first year of a 2-year period, and a 4.04% increase in the second year of a 2-year period. It's obvious that the lower rent in the first year of each 2-year period far outweighs the slightly higher rent in the second year of each 2-year period.

: If the increases are low a two year lease is always better. You can benefit for two years even if the rental increase amounts go up. I know tenants now that would be paying the new (higher) increases if they hadn't signed a two year lease.

: Kerry

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