As a landlord, you can’t ever sit back and relax. Just because you have good tenants in your properties at the moment, doesn’t mean they’re guaranteed to stick around. It’s up to you to retain them by encouraging and motivating them to renew their leases over and over again. Do you have a plan for doing so?
Lease renewals are integral to being a successful landlord. But do you know exactly how important they are? Benefits include:
From a practical point of view, finding new tenants is a logistical, resource-intensive mess. (Especially if you want a good tenant – not just a warm body.) Getting a lease renewal from an existing tenant saves you time and money spent conducting an inspection, cleaning the property, posting ads, showing the property, screening tenants, collecting money, explaining the lease, changing over utilities, etc.
Vacancy is expensive. In addition to the resources it takes to find new tenants, there are expenses and holding costs associated with having an empty property for an extended period of time.
Lost rent (each month the property sits vacant) is the main sticking point. Then there are the mortgage, property taxes, insurance, and utility bills that still have to be paid, even if there’s no income. If you’re in a really tight spot, you could even have one of your properties go into foreclosure as a direct result of a prolonged vacancy.
One of the frustrating things about turnover is that you have to “sell” the property to someone all over again. (In other words, you have to convince them that it’s worth leasing.) Renewing an existing tenant, on the other hand, isn’t nearly as difficult. They already know the flaws and justified them long ago. Whether it’s a tiny hole in the wall or a broken tile, they probably won’t ask you to fix it (unless they’ve already made a request.)
Even if your tenant isn’t the best renter in the world, there’s something reassuring about working with someone you already know over a total stranger. Predictability is a good thing in this industry and a lease renewal allows you to capitalize on this.
Now that you understand just how important lease renewals are, you can develop a game plan for actually getting tenants to renew. Here are some practical suggestions that many landlords find simple and effective:
You know your tenants better than anyone else. Based on your knowledge of your tenants and the aforementioned best practices, you can develop a repeatable process that helps you consistently retain and renew tenants.
In the vast majority of cases, renewing a lease makes sense. However, there are certain situations where offering a renewal may not be the best course of action. Here are some red flags:
There may be other extenuating circumstances where a renewal isn’t the best way forward. Trust your instincts and always balance short-term gain against long-term ROI.
At Green Residential, we take pride in our ability to offer Houston landlords with comprehensive property management services at an affordable price. When you work with us, we handle the heavy lifting and small details so that you can put your focus on the big picture. Contact us today for a free Houston property management analysis!
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