Fixed Rent schedule remorse

[Alex Forest]

About two years ago, we entered into an annual Lease agreement that set the rent for four years. The second had a bump (~2.5% increase) from the first year. The third and fourth fixed and same as the second.  The Lease is an auto renew, but for one year, so it can be non renewed by either party, but a rent schedule is included such that if it is renewed the amount is specified. Its going into the third year in early 2022.

A little background, The rent when they moved in was increased approximately 9% higher than the previous. There was an issue with the previous roommate tenants (dispute between themselves...also seemed like trouble in general which I hadn't foreseen during screening) so it was agreed they would move if a qualified tenant was secured. My mind frame at the time was to secure a quality tenant in a relatively short time and to get up to around market rent, if not slightly below. The new rental rate for the Townhome in early 2020 was about $350 above mortgage, HOA and utilities are not included. Also, this is on a 20 year mortgage about 9 years in, so really paydown with a low maintenance quality tenant was the focus. To try to secure/finalize it at the time, the rent schedule was offered because this had been expressed as a concern by some prospective candidates at the time.

Fast forward two years later, and they have been very good to date.  But, the rent is going to be very below market.  I haven't done a market rental rate analysis for the area, but Zillow pegs it at $2195 which is already $600 above what was market rate only 2 years ago.  Having some remorse over this self inflicted situation. While the coming year might be ok (though very annoying), the fourth, assuming conditions are similar to today, will be difficult to see through. My mind frame now has evolved from two years ago, and I now see the extra income as enabling greater security reserves, providing the ability to hire repair folks instead of DIY which saves personal time, and to improve the property more beyond the minimal.

Any suggestions on how to approach this beyond a 1) non renew or 2) wait until end of year 4?  Or am I stuck with this self inflicted gun shot through the foot?  I'm not sure a 'there will be an increase this coming year, or you can non renew' is a viable option either. It would be nice to work with these tenants, avoid turnover and a potential vacancy gap, etc.  Is there a tactful way to approach and communicate?  Thought I would throw this is out to the BP community. Thanks.