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6 Ways to Get a Tenant to Renew Their Lease

In my last tip on reducing vacancy, I briefly mentioned the importance of being intentional with lease renewals. Today I want to dive deeper to give some winning lease renewal strategies. Check out my video above for even more details.

When you have a good tenant, you don’t want them to move. Period. That turnover will cost you much more than a renewal. So here are 6 things you can do to dramatically increase your chances of a successful lease renewal.

  1. Be an awesome landlord! What does this mean? Well, be responsive, friendly, helpful, respectful, courteous, and actually treat your tenants like valued and appreciated customers. Treat them as good or better than when they were interested in renting from you. It has been shown that 70% of tenant move-outs are preventable simply by the landlord doing the basics really well.
  2. Start the process early. Communicate with your tenants 90-120 days prior to the expiration of their lease. If you wait until 30 days out, it’s most likely too late! We have found that if the landlord is the first one to bring up the renewal, it drastically influences a tenant’s decision making process. You put renewing in their mind before their mind thinks of moving.
  3. Budget for the renewal like you would for a turnover. How much do you plan on spending if the tenant were to vacate? Advertising fees, deferred maintenance, vacancy, and other costs really add up. We have found that if a landlord budgets 20-30% of their turnover cost and apply that on the front end to entice a tenant to stay, it pays huge dividends. The new points will give you ideas on how to allocate that budget.
  4. Give them a reason to renew. Now hopefully, you being awesome and having a fantastic rental and neighborhood are reason enough. But often they are not. So what does the tenant want or need? Start finding out their wants/needs as you do routine inspections or have conversations with them. Ask them “Hey John, I may be looking to make some improvements with your home. Is there anything with the house that is bugging you?” Their response will give you an idea of where you may need to focus some attention. It will also show them that you care about them and your property. Which again, will encourage them to stay with you.
  5. The reduced rent increase strategy. This is one of my personal favorites simply because it gets such great results, and it’s simple. If you plan to increase the rent by 3% this year, let them know the increase will be 5% but if they sign their lease by X date (usually 2 weeks out) the increase will only by 2%.
  6. Save the sale. When you ask for the renewal and they tell you they are thinking of moving, or they give you that impression in some other way. Offer them a credit towards their first month of their new lease for signing the renewal, again by a 2-3 week deadline. Usually, that credit is 10-25% of a month’s rent. But seriously, if it helps prevent a vacancy, and the tenant has been awesome, you may want to increase it even more. It’s amazing how offering a couple hundred dollars can change someone’s mind that was thinking of moving.

To your lease renewal success!

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Filed Under: Property Management, Property Managers, Real Estate Investing, Rentals Tagged With: Lease Renewal

How to Maximize Your Rental Income

What is the number one killer of ROI?… Vacancy!

There are many tactical and strategic ways you can reduce property vacancy, but there’s not enough time to explain all of them here! But, I will be diving deep into them in my upcoming book and podcast, The Successful Landlord’s Playbook.

Today, let me touch on one element. RETENTION. It’s obvious, if you can keep a great tenant from moving out, you can avoid a vacancy. Did you know that 70% of tenant turnover is preventable?

So how can we do this? Well, here are a few things to consider which I’ll explore in more detail at a later time.

  1. Know What Your Tenants Want
    • National surveys show that the top 3 things tenants want and complain about are: 1) Responsive Landlords, 2) Reliable Landlord & Housing, 3) Respectful Landlords.

So… let’s do these things. Let’s:

  • Treat out current tenants as good as (or better than) we treat potential tenants!
  • Invest money in them and retention rather than just in marketing and leasing
  • Remember them and check on them regularly
  • Provide them with resources (how-to guides, preferred vendors, etc.)
  • Offer resident benefits (insurance, filters, discount books, etc.)
  • Start renewals early
  • Offer renewal incentives (discount if signed by X date, increase rent reduction)

Let’s work hard to keep out great tenants happy and begging to renew their lease with us!

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Filed Under: Property Management, Property Managers, Real Estate Investing, Rentals Tagged With: Maximize ROI, Rental Income

How much should I budget for a tenant turnover?

How much should I budget for a tenant turnover?

Here are some general guidelines as well as our philosophy when approaching tenants and turnovers with properties we personally own.

I for one, am happy when a great tenant stays in my property for a long time. One of the biggest frustrations tenants experience is when a landlord kicks them in the pants (so to speak) on their way out of the property by nickling and diming the tenant for every little charge. Some rental owners expect to not have to put any money into their property when a tenant moves out. They expect that the tenant’s deposit will cover everything. And if it doesn’t they get upset. Consequently, they also experience a lot of struggles over time with their rental. I believe these owners get frustrated simply because they are not prepared for the turnover and they don’t have the right approach.

Here are a few points to consider with maintaining your rental. You should be budgeting 10-15% of all gross rental income to go towards maintenance and repairs. And that may not even always cover larger capital improvements such as the roof and remodels.

You see, savvy investors plan on replacing carpet every 5-7 years, and even change out carpet to hard surface flooring to extend this timeline. They also budget to repaint every 5-7 years.

When it comes to turnovers, effective landlords will typically require the tenant to clean the property, have the carpets professionally cleaned, and have damages fixed. That said, if the tenant has been there for 2 years, they may thank the tenant (and avoid vacancy) by offering free cleaning now or when they move if they renew for another year. Or they simply won’t be super picky when the tenant moves out. They will plan on freshening up the place by recaulking, doing some paint touch-up (at their expense), sprucing up the yard, taking care of wear and tear items as well as even some items the tenant caused. Yes, I said effective landlords even budget to repair some minor tenant caused damages. Now why would they do that? Well, it reduces vacancy costs (which is the big killer of ROI) by increasing the average tenancy stay, making their property more attractive, having happier tenants which increases referrals, and frankly, it’s just the right thing to do to take care of their customer.

So how much should you budget for a tenant turnover? Unfortunately there’s no magic number or formula as each property varies, but one rule of thumb some investors use is to plan on putting a half to a full month’s rent for each year it’s leased back into the property at each turnover. Picture it as putting a little money into your retirement account. You can’t make money in mutual funds unless you keep putting money into it. With rental property, you have to put money into it, but you also get the advantage of the tenant and the market putting money into your property. That’s the trifecta of rental wealth creation!

With that, I hope you have minimal tenant turnovers, but when they happen, you will now be better prepared for them.
Thanks for watching, and take care!

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Filed Under: Real Estate Investing

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