The time has come to figure out whether your current renter will renew their lease or choose to live elsewhere. Below, we will go over some benefits to renewing a lease with your current tenant and some other considerations to review before doing so.
The key benefits to renewing a lease are:
- Save time and money
- Existing familiarity with rules and expectations
- Risking lower quality tenants
- No risk of vacancy
Saving Time and Money
Finding new renters can be difficult. You must first market the unit by writing a listing and advertising it. Once you get some interest, you must screen those potential applicants and sign a new tenant. All these steps can take a while to complete, and to find quality tenants, you must spend the money on their background checks and take the time to call their references. When you already have a unit that is occupied with a quality renter, you don’t have to worry about taking these steps.
Existing Familiarity with Rules and Expectations
There are certain expectations that landlords communicate with their tenants. These expectations can include tasks for the upkeep of the property, like watering the plants or mowing the lawn. When you rent to someone new, you have to tell the new tenant what those rules are and make sure they agree to them. With a renter who simply renews their lease, you don’t have to reestablish any expectations or rules.
Risk of Lower Quality Tenants
You may have a renter who is fantastic and treats your property with the utmost respect. If this renter decides to leave, you not only have to screen new options and take the time to do so, but you run the risk of accepting someone who is of lower quality than the tenant you had before. You know exactly what to expect from the person you’re currently renting to, and good tenants are worth keeping.
No Risk of Vacancy
When someone moves out, there is a chance that the unit they previously occupied will be vacant for an unknown amount of time. Between loss of rent, repairs, marketing, and more, tenant turnover can cost upwards of a couple thousand dollars. Keeping good tenants is much better than risking a vacant unit.
When you renew, you may want to consider increasing rent. Sometimes changes in the local market can demand such a choice, but it’s generally recommended that you only increase your tenant’s payment by 2-5%. If you raise the price much more than that, you could run the risk of losing a good renter because the price would exceed their budget.
Also, when offering a lease renewal, try to give your tenant at least 90 days before the end of their lease. Do so by sending an email or a letter, so your tenant has the information in writing and can take their time in deciding whether or not to move forward with it. Give them 30 days to respond to your offer, and if you don’t hear back within that time frame, follow up with them and wait a bit longer, or begin the process of looking for a new renter.
Reasons to Avoid Renewing a Lease
Although renewing is generally the better option, there are a couple common reasons why a landlord would prefer not to. The first reason could be that the unit needs extensive repairs and would not be a good living environment for the current tenant during those repairs. You can either choose to not renew the lease with the current renter, or, if they are a quality tenant, you can try to move them into another available unit for the duration of the repairs.
Of course, the second reason to not renew with a tenant is if they are a poor renter. They could be in violation of their lease agreement, a nuisance to neighbors, or consistently missing rental payments. In that case, send your tenant a letter at least 60 days (about 2 months) before the end of their lease and state your reason for choosing not to offer a lease renewal.
The Pros Outweigh the Cons
To keep your units occupied and full of happy tenants, make sure you provide all the services you promise in your lease agreement and communicate frequently with your clients. You want to have quality renters who choose to stay in your units in order to avoid constant turnover. Renewal should be your goal when you have a quality tenant.