Finding good tenants is not easy. A tenant that pays their rent on time, cares for the rental property, adheres to the lease agreement, and is respectful is the dream of any landlord or rental property management company. So, what do you do when the lease term of such a renter comes to an end? You could simply let them go and look for a replacement. However, it would be wiser to convince the tenant to renew their lease and stay longer.
What Are the Benefits of Renewing a Lease?
Here are some of the advantages of getting a lease renewal:
- Avoids turnover costs – Preparing the rental property for a new tenant involves costs such as applying a fresh coat of paint, re-staining a hardwood floor, fixing holes in walls, and replacing broken tiles. It will make your property management business look good if you can avoid having your client pay such costs too often.
- Reduce rental vacancy rate – When the rental property is vacant, your client will be losing rent, and depending on the property management agreement you have with him/her, you may also not be paid if no rental income is collected. So to keep both you and your property management clients happy, it’s best to get a lease renewal and reduce vacancy rates.
- Saves time – Retaining a tenant will save you hours that you would have spent on posting ads, showing the home, screening potential renters, going over lease clauses, and overseeing move in.
- You can increase rent – In most states, you cannot increase the rent until the tenant’s lease is due for renewal. If the tenant accepts your terms for lease renewal, you will avoid a vacancy and generate more rental income for your client.
- More predictability – Your current renter is probably very conversant with the terms of the lease. They know what is expected of them in all situations. Retaining them will save you the trouble of adjusting to a new tenant.
Tenant turnover is something that most property managers would want to avoid. So here are some property management tips for getting tenants to sign a lease renewal agreement:
5 Ways to Get a Tenant to Sign a Lease Renewal Agreement
1. Simply ask renters to renew their lease
Though this might appear to be a no-brainer, many property managers and property owners wait for the renter to express interest in lease renewal. However, some tenants might not even think of renewing their lease unless they are asked. This request should be made at least 90 days before the lease expires. The tenant will have ample time to think about your offer and make a decision on lease renewal.
So, How Do You Ask a Tenant to Renew a Lease?
You can ask for a lease renewal face-to-face, or send a letter or an email. Here is a template that you can use to ask a tenant to renew their lease:
Dear [renter’s name],
I’d like to remind you that your current lease ends on [date]. Thank you for being such a great tenant for the last [duration]. If you are interested, I would love to offer you a [duration] renewal at [dollars per month]. If the terms are acceptable, kindly sign the attached lease agreement. In case you need any clarification, feel free to get in touch with me.
If you don’t hear from the tenant within a week, you could make a follow-up phone call. Don’t forget to mention the incentives the tenant will enjoy for lease renewal. At times, tenants might make their own demands as a condition for renewing the lease. Be open to negotiating and coming to an amicable agreement.
2. Offer incentives
Small gestures can go a long way in boosting your resident retention. For example, you could promise not to increase the rental price if the lease is renewed. If they sign a two-year lease, consider offering a discount on rent. Another incentive would be to offer to upgrade their rental property free of charge. This could be anything from adding a new coat of paint, landscaping, replacing doors, installing wood flooring, or buying a washer/dryer. However, don’t promise upgrades that are not in the budget for the sake of lease renewal.
3. Build trust and credibility
It is easier to get a lease renewal if tenants like and trust you. You should, therefore, work on building trust and credibility with your tenants from the moment they move in. Return messages and calls promptly, and be quick to deal with complaints and repairs. Be friendly and nice at all times when relating to your renters. Stay on top of routine maintenance tasks such as refreshing batteries, changing HVAC filters, testing smoke alarms, extermination, checking for water leaks, landscaping, and cleaning the gutters. When a tenant is happy with their rental property and the property manager, they are likely to be open to the idea of staying there longer.
4. Offer a grace period for late rent payment
If rent is due on the second, consider offering a short grace period for late payment. For example, you could allow renters to pay up to the sixth without charging a late penalty fee. Providing a grace period will show tenants that you are a reasonable property manager. It will, therefore, enhance the chances of tenants renewing a lease.
5. Be present
As a rental property manager, being physically present as much as possible will go a long way in building a rapport with your tenant. You can start by being at the rental property on move-in day to personally welcome them and hand over the keys. Take a few minutes to show them how appliances work. Even if you hire contractors to handle repairs, you could show up personally to supervise or inspect the work. On special occasions such as Christmas or your tenant’s birthday, send a card. All these gestures will help build a great relationship and make the tenant want to stay longer.
Lease renewal will help property managers and their property management clients save lots of time and money. Having a lease renewal strategy will boost your occupancy rate, keep the rent coming in, and keep your clients happy.
Lease renewal is a great way to boost your property management career. But there are other ways you should be exploring today. Click here to find out what they are.