Lease Renewals: Why They Are Important
Most likely as an owner of a rental property you have had to deal with and sometimes stress over that ringing question of: to renew or not to renew? Should I let the lease roll over into a month-to-month or extend the lease another year, or two or three? Before long you thoughts are running amok and you now find yourself asking what if and what happens when. A long list of pros and cons soon emerge only to find yourself back at square one asking yourself what would be in your best interest. Well, now is the time to put your mind at ease because we are here to help.
First off, let’s put the pros and cons of renewals aside for just a moment and talk business. As a landlord and management company it is our goal to have a renter in place at all times. In order to achieve this goal there are a few things you will have to do and consider during renewal time in order to make that happen. First up is to make your tenant want to stay. We know it’s such a bold statement but humor us for a second. Every landlord would like to have a low turnover rate. It is costly to attract and retain good tenants especially when you factor in the costs of turning over the property, onboarding a new tenant and the cost of vacancy. It just makes good sense to strive to have happy, long term tenants living in your rental. Some ways to achieve this are by preventative maintenance and incentives. Your tenant probably chose to rent your unit because they liked the look of the property. Fresh paint and a clean floor can be very attractive to a new tenant. Unfortunately, many landlords let preventative maintenance needs fall by the wayside when the property is rented. Your tenants will want to stay longer if they continue to be proud of it. Perks such as carpet shampoo, new appliance or new accent paint can go a long way when looking at a lease renewal. Also, to keep a tenant in place you might have to negotiate the renewal terms. Most lease renewals come with an increase in rent. Markets are up and so that means prices rise as well. You may come across the tenant who does counter offer your terms. What do you do now? Don’t be afraid to compromise or offer incentives because finding the balance can be the key to keeping a steady rental income. Sometimes by offering to shampoo the carpet or repaint the living room can be just the negotiation tool you need to get the tenants to agree to your original terms.
Now that we have addressed lease renewal incentives we can address the pros and cons of renewing. Some owners prefer the freedoms that come with a month-to-month tenancy. At any time with a 30 day notice you can change the terms of the tenancy, such as increasing the rent. Or with a 60 day notice you can have them vacate the premises. The main downfall in a month-to-month lease is that your tenant can also give notice to move out within 30 days. If it is during the slow season this can result in a huge loss of money for the owner. If you are contemplating a year extension you need to think about if you are happy with the current tenants that are in place. Do they pay on time? Do they report maintenance items promptly? We do find that most owners like the idea of knowing that funds are coming in on time and that reliable tenants are in place and taking care of the home. A lease renewal means your unit is set to be occupied for the lease term and that rental income is set to come in every month. So whether you chose month-to-month or lean towards a longer term renewal, the main goal to keep in mind is to keep your rental occupied.