Every lease renewal should keep both the tenant’s and landlord’s best interests in mind. While most people would say it’s impossible to please everyone, if handled correctly, a lease renewal can leave both parties happy. If you have a tenant that pays on time each month, respects the rental property, and doesn’t excessively call-in complaints or maintenance requests; you should seriously consider renewing the lease. A good tenant is hard to find, and vacancy is one of the easiest ways for your investment property to lose money. There are a variety of factors in each renewal, use these tips to keep your tenants and yourself happy when it’s time to renew.
Start the Renewal Process Early
Initiate the renewal process as early as possible, so neither side feels left in limbo. Many landlords choose to include a lease renewal option in the original contract. These options traditionally include a set % increase agreed upon when the original contract is signed. If you choose not to include a renewal clause in the rental agreement, start the process 1-2 months before the current lease expires. This gives the tenants peace of mind and allows for them to plan for staying or moving. If you don’t have a set renewal rate, your next step is to determine the fair market value of the lease.
Determine the Fair Market Value
If you don’t set an automatic rent escalator in your lease agreement, you will need to determine the fair market value of your rental property. A lot can change in a year, especially in a hot market, so do your due diligence when determining the fair market value of your rental. Once you have done your research, if you wish to keep your current tenants, offer just below market value. This will keep your tenants happy because they are getting a good value, and will most likely not affect your bottom line. If you have a quality tenant, you may want to offer them an even more attractive rate. Between the risk of vacancy, the risk of bad tenants and the cost of turning a rental, it can be financially beneficial to keep your current tenants even if you aren’t commanding the absolute top dollar rent.
Address any Complaints
When you start the renewal process, be sure to address any complaints. If you have a great tenant in place, hearing out their issues may make them more inclined to stay. Requests like, the garage door sticks or the floodlights in the driveway point into the bedroom, are easy, inexpensive fixes that make your tenant’s day to day life better!
The entire renewal process depends on the quality of tenant, market conditions and marketability of the property. If you have an exceptional tenant in place and are worried that they might vacate for a better deal, consider offering incentives. A break on the first month of rent after their renewal is one of the most common incentives. A $200 discount on one month of rent is a small sacrifice to make for long-term positive cash flow!
The Lease Renewal Process
Sometimes finding the right tenant and securing a renewal can simply be the luck of the draw. If you have a good tenant in place, handling the lease negotiation with a personal touch can help you keep them. By using these tips to incentivize the tenants who respect your property and pay their rent on time, you can maintain profitability. A good lease renewal will keep everyone happy!
Property Management Company
Sometimes it is best to have a third party, such as a property management company, facilitate a lease renewal. With years of experience and an invested interest, a professional property manager can be an asset to any lease renewal. Negotiating renewal is typically done to benefit the owner’s best interest. The renewal rates are set based on market conditions, quality of tenant, type and marketability of the property, and time of the year. At Precision Realty & Management Company, LLC offers their best tenants a renewal rate just below the market rate, proving to the tenants that we would like to keep them “on board.” Handling negotiations in this manner has maintained a high market occupancy rate. To learn more about property management and the services they provide, contact Precision Realty today at 281-866-7400.