When the tenant's lease is coming to an end, you have a decision to make. If your current tenant wants to stay longer you can choose between renewing their lease or finding another tenant. Renewing a lease means that, at the end of the lease term, you and your tenant decide to renew the contract. If you choose to renew, you create a new lease with similar terms to the original lease, and both parties need to sign again. You need to consider that finding a new tenant will cost you time and money. The more time it takes you to find a new tenant the more money you are losing. Every month that your property is vacant you are not producing cash flow. That being said we do not advise you to keep a bad tenant. A bad tenant is not only a hassle to deal with, but can also cost you thousands of dollars.
You would not want to renew a lease agreement to a tenant who is paying rent below the market rate or who pays rent late. You also want to avoid renewing a lease to a tenant who complains a lot or makes big issues on minor maintenance problems. You want to avoid difficult tenants who create problems or disrupts the neighbors. Most importantly you do not want to renew a lease to a tenant who causes damages to the house or makes illegal use of the house.
Some of the disadvantages of renewing your lease are that you may be limited to the amount you can raise the rent. You also have to make sure you follow your state’s laws in order to increase a tenant’s rent. If you are planning on renovating the house then you certainly do not want to renew the lease. Making renovations when someone is living on the property can be a real hassle and cause a lot of problems.
If you have a good tenant you definitely want them to stay and avoid having to find new tenants. It is also important to mention that your current tenant understands your rules and you will probably have fewer problems with them. A good tenant is one who pays on time, takes good care of the property, notifies you of maintenance issues and respects neighbors. Lease renewal will avoid vacancy costs & apartment turnover. Lease renewals are a great opportunity for you to save time and money.
Lease renewal will save yourself from:
- Possible move out repairs
- Vacant property utility costs
- Marketing the property
- Screen potential tenants
- Showing the property
- Signing new lease agreements
- Collecting money
- Going through a new move-in checklist