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.
- 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.
- 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.
- 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.
- 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.
- 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%.
- 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!