Renting out your home offers one of the best opportunities to build a steady cash flow. That is, as long as you find the right tenants for each property. After all, low turnover and vacancy rates are essential to becoming a successful landlord.
Once the perfect tenants are in place, renewing their leases year to year is one of the easiest ways to maintain that steady income flow. However, there are many reasons why renters choose to move out. For example, marriages or divorces, the addition of a child, or job relocations are just some of the various reasons people move from home to home.
Unfortunately, you cannot prevent such reasons, and tenants are apt to move regardless of what you do to encourage them to renew their leases. But, as a landlord, there are things that you can do to persuade tenants without those life circumstances to want to continue renting from you.
Let’s take a look at some essential tips for encouraging your renters to renew their leases and secure long-term tenants in your rental homes.
How Do Lease Renewals Work?
Once a tenant’s lease is up, they can move out, or sometimes, they have the chance to renew the lease. Typically, property management services in Northern Virginia will help by sending out a lease renewal offer around 90 days before the current lease is up.
In some areas, there is the option to include an automatic lease renewal clause within the original lease agreement. This clause allows the lease to renew for another term automatically (or on a month-to-month basis, should the tenant choose) at the end of the original duration of stay.
To terminate this automatic lease renewal, the landlord or tenant must give proper notice to the other party indicating a lease renewal is not desired. Additionally, for a lease renewal clause to be considered valid and enforceable, the clause must be distinctly separate from the other lease provisions on the lease.
The tenant must acknowledge the clause and accept the terms with a signature on the actual lease agreement. You cannot enforce the renewal if you cannot show the tenant’s signature, initials, or witnessed mark acknowledging the automatic lease renewal provision on the lease itself.
Some leases do not have automatic renewal provisions. If this is the case, you must provide a new lease agreement to continue renting to that particular tenant at the end of the lease term.
Benefits of Lease Renewals
Both landlords and tenants can benefit from lease renewals. Tenants benefit from lease renewals because they don’t have to leave a steady, familiar place to live. Renewing a lease agreement is great for tenants who want to stay in a property unit for longer than one year.
For landlords, the benefits are more obvious–fewer vacancy periods and continuous rental income. Similarly, landlords can increase rental rates when a tenant renews their agreements.
If you want to increase the monthly rent upon lease renewal, it is your responsibility to notify the tenant so they can decide whether to take advantage of the lease renewal at the end of their stay. Then, you must then negotiate a new lease agreement with the new terms.
5 Steps for High Renewal Rates
You can do several things to encourage your tenants to renew their leases at the end of their original stay. Here is a list of five steps you’ll want to take while renewing a rental property lease.
- Be Proactive
- Inform Your Tenant
- Be Aware of Tenant Options
- Provide Incentives
- Be a Good Landlord
Many landlords feel that tenants should initiate the process of lease renewals, yet this should not be the case. A tenant may not understand that process, and if you are interested in renewing the lease with your tenant, expressing that can get the process rolling. On the other hand, if a tenant feels that a lease renewal is not an option, regardless of whether they wish to stay or not, they may begin looking elsewhere, leaving you with vacant rental property.
Research rental rates in your area for comparable market rates; the key is to stay lower than it would cost your tenant to move to a comparable place. Have your Northern Virginia property management company send out a renewal letter in advance. This notifies your tenant you are aware a lease renewal is approaching. In addition, consider having your management company call the tenant personally to discuss the upcoming lease renewal options.
Inform Your Tenant
Keep your tenant updated should you wish to increase their rent upon lease renewal. Tenants will not likely leave over a slight rent increase. However, surprising them last second is not the best way to handle the situation.
If you want to increase the rent for an upcoming lease renewal, you must give notice. In most counties, you must give notice in writing at least ninety days before the end of the current year of the tenancy.
If your tenant is hesitant to renew based on a rent increase, consider giving them information about the local market. If comparable properties are in the same price range, tenants will be more likely to stay in your rental property.
Be Aware of Tenant Options
Understand that you are not the only one who may want new terms during lease renewal. Anticipating your tenant’s requests for changes will make negotiations easier. Although many tenants believe they must exercise the automatic renewal clause in the lease, this is not always the case.
Tenants do not have to exercise their option to renew automatically. In fact, many won’t because it limits what can be negotiated in renewal. If a tenant does not have all of their concerns addressed, they may not sign a lease renewal. Thus, leaving landlords out of luck.
If you have the perfect tenant in your rental home and want them to stay, offering incentives is a great way to encourage them to renew their lease with you. Remember, if your tenant renews their lease, you will be saving money and time.
Many landlords feel they must increase rent every year. Instead, consider agreeing not to increase rent if a lease is renewed so that a great tenant will stay. If you constantly raise the rent, a tenant will likely find something else and leave because renting offers flexibility.
Another option is giving your tenant a deal on the first month’s rent of the new lease. If your tenant respects your property and pays on time (popular reasons for wanting them to stay in your rental home), they can get their security deposit back. Again, this offers something of value to your tenant without costing you anything.
Be a Good Landlord
Handle repairs and complaints quickly, return calls and messages promptly, and be friendly. If you have little contact with your tenants because you use a property management group, be sure to employ a company with an exceptional reputation to deal with your tenants.
Provide both interior decor and exterior curb appeal for your tenants. Utilizing cost-effective ways to increase the value of the property and maintain the visual appeal will help your rental property remain competitive in the market and make your tenants happy to continue living in your property.
How Can You Get More Lease Renewals?
Exercising these tips for encouraging your tenants to continue renting your homes will increase the chances of you gaining long-term tenants. While Richmond rental property management can be lucrative, constant turnover can wreak havoc on your cash flow.
Having a competent property management group by your side will better your chance of gaining lease renewals from your tenants.
Should you decide to use Bay Property Management Group for your rental property needs, rest assured that original lease agreements will have the proper renewal clauses available to your tenants, but every other aspect regarding your rental property will be cared for.