A landlord with great tenants should never hesitate to offer a lease renewal. Lease renewals save time, eliminate costs involved with finding a new tenant, and reduce risks of vacancy. However, a landlord should still consider the following before offering a lease renewal.
Most experts recommend offering a lease renewal 90 days prior to the expiration of the current lease. You can choose between offering the renewal in person, via email, or through a letter. Aim to receive a reply within 30 days of your offer. This will give you adequate time (60 days) to market the property, adjust your rent application, and find a new tenant if your current tenant declines your offer.
Before offering a renewal, decide if you want to change the price of rent. If you have ideal tenants who take great care of the property and always make payments on time, consider keeping prices the same to motivate them to stay.
On the other hand, you might want to consider increasing the price of rent if it’s warranted by current market conditions. Since rent-controlled areas govern how often and high landlords can raise the rent, make sure to check with your local statutes.
Costs of finding a new tenant
As previously mentioned, offering a lease renewal eliminates the potential costs of finding a new tenant. However, you keep in mind how much it’ll cost you to find a new tenant in the case that your current tenant declines. The expense of turning over a vacant unit averages around $1,750 a month.
Tenant turnover is time-consuming and expensive. By offering a lease renewal and keeping your tenants longer, you will become a more profitable landlord with a more consistent rental income. You’ll be able to save time and effort preparing the unit for rent, and avoid the uncertainty that comes with renting to a new tenant.
Once presented with a lease renewal offer, your current tenant might request optional updates or changes to the lease or property. In order to determine whether the cost of their request is worth the renewal, weigh it against the cost of turning over the property. For instance, a tenant’s request to repaint the apartment is typically reasonable when considering the costs associated with finding a new tenant.
The tenant can decline
There are a multitude of reasons why lease renewals don’t always work. If your tenant has skipped rental payments or failed to take care of the property, you should pass on offering them the option to renew their lease. You should only be offering lease renewals to good tenants who pay rent on time, take care of the property, and respect both you and their neighbors.
Even perfect tenants sometimes turn down lease renewals. It’s not uncommon for a tenant to decline an offer for renewal because they’re moving out-of-state, moving closer to their workplace, experiencing lifestyle changes, or they want to live somewhere with better amenities.
Although most of these reasons are unavoidable, making sure the rental experience is positive increases the chance of a tenant choosing to renew. In addition, building trust and credibility with your tenants makes them more inclined to keep working with you.
Finding new tenants comes with the time-consuming and expensive process of marketing the property, sorting through rental applications, showing the unit, and screening potential tenants. In order to save time and effort, as well as become a more profitable and successful landlord, consider offering your current tenants the option to renew their lease.