Mortgage rates for real estate investors are still stubbornly low and make it a good time to finance long term purchases. The lower the rate the better the cash flow each month.

So if you can lock in low rates for say 15 or 30 years, should you also look at longer term lease contracts for your tenants? Islong term leases a good idea it a good idea to tie up a tenant for, say two years? Sure, there are advantages but there are also some disadvantages. Let’s look at both.

Long term leases provide the property owner with peace of mind. The monthly income will be consistent for at least the term of the lease and cash flow is more easily managed. The mortgage payment is fixed throughout the rental income is the same. There’s no guessing and better managing your financial portfolio. If your two year lease is up for renewal and your tenants are looking at other rental properties, you may even consider a slightly discounted lease to entice the tenants to stay. Just one month of missing rent puts a dent in your cash flow.

Yet a long term lease prohibits you from adjusting to current market conditions. Today market rents are up in most parts of the country due to increasing demand. This demand drives up rental rates and if you have a long term lease

A long term lease also lets you keep good tenants longer. If you’ve properly vetted your new tenants and they have solid income, a verified rental history and good credit, you may be tempted to solicit a longer term lease. On the other hand, should those very same tenants turn out to be not-so-good tenants it’s a difficult process to cancel a lease agreement and evict a non-paying tenant.

Both short and long term leases have their good and bad sides but the prevailing advice might bet to mimic the market. If six month leases are common and that’s what tenants are expecting, then follow the market. Shorter terms allow you to adjust to current conditions while longer terms lock in good tenants.