Investment owners should want to do everything possible (within reason!) to keep their unit occupied by good renters. The experience of turning a unit, finding new residents, and being burdened with the expenses related to this process is the most expensive and frustrating part of being an investment property owner. Getting your residents to renew their lease is important goal, and one we take seriously (and you should too!). This video and article will help you understand the importance of lease renewals and give you four tips for getting your residents to renew.
IMPORTANCE OF LEASE RENEWALS
The number one way to limit your property expenses as an investment owner is by renewing the lease. Having a vacant property is by far the costliest thing you will experience as an investment property owner: you are receiving no income from the home; you have maintenance expenses such as unit turn, cleaning, lock change, repainting, carpet cleaning etc; and you still have your fixed costs of holding the property such as mortgage, HOA dues (community maintenance fees) and insurance while you’re not generating any income. Generally, if you are using a management company you will also have to pay for a lease up fee in order to find another qualified tenant for your home.
A landlord’s dream scenario for their investment property would look like this:
- Find a qualified tenant within hours of posting the ad for the property
- Tenant pays rent on time every month
- The tenant never complains, keeps the property in great condition and does most maintenance himself.
- Tenant stays in the property for 25+ years.
Of course, this happens very rarely, but landlords can do their best in order to increase their chances. If you want to avoid a vacancy, we have few tips for you:
FOUR TIPS FOR GETTING YOUR RESIDENTS TO RENEW THE LEASE
#1: Renewals begin with your FIRST interaction with your potential resident.
Give renters a great experience before they’ve even decided to rent from you. Be professional and knowledgeable in the showing process (no conflicting or hidden information!), provide a pleasant application experience, and conduct a well-organized move-in to increase your chances of making your residents happy they have selected your property. On the other hand, if they have a bad experience during the application process, move in or any time beyond that they will think twice before renewing with you.
#2: Keep your residents happy!
Keeping your residents happy once they are in the property makes them far more likely to renew the lease on annual basis. Make sure to respond quickly to any maintenance issues they report during the lease term. Check on them every now and then to make sure everything is okay with the property and they aren’t have any issues. Tenants appreciate the check-in calls or texts, even if they don’t respond to them. Unhappy residents are far more likely to seek out better management – as the saying goes, the grass is always greener on the other side.
#3: Start the lease renewal process early.
Do not wait until the last minute! The residents may not know that they have the option to renew and could be on the lookout for something else. Notifying them well in advance that they have the option to renew is always important. Tenants will appreciate the fact that you want them to stay and that you’re not leaving the renewal for the last minute, like they’re an afterthought. This will also give you a chance to change their mind in case they are planning to move. For example, your tenant may not be happy with the fact that the carpet has not been cleaned since they moved in, and may not know that you are willing to get it professionally cleaned for them. They will mention this as one of the reasons for not renewing the lease and you can quickly change their mind by scheduling carpet cleaning when they renew their lease.
#4: Be open to negotiation!
As an investor, you need to be open to negotiations and weigh your options. Especially in these times you do not want to draw a hard line with your terms. Landlords love increasing rents and increasing their cashflow. However, doing this every year may push your tenants to consider moving to a different property just so they can take advantage of a lower price or rent initiative. Keeping the rent the same or negotiating to a nominal increase is going to cost you less down the road than a vacant property. In addition, you always want to take into account their circumstances and offer some sort of negotiation during the renewal process if they don’t accept your initial rental offer.
TO SUM UP...
Getting a great resident who does not request maintenance for every little thing, who is clean and takes care of the property, and who pays their rent on time is not easy, so getting this type of renter to renew their lease must be a priority. You never know what you are going to get with a new tenant in the property, even if you screen them thoroughly.
Good residents also make it easier to attract other good residents to the property. This is especially important for owners of multi-family homes. Good renters want to live in a clean, quiet property with renters who are equally conscientious of their surroundings. Keeping good residents will help your investment in the long run!