Renewing a rental lease is always a time of opportunity for investors, so it's important to understand those opportunities (so you don't miss them). Yet, lease renewal can also be a tricky time because tenants may be considering leaving.
Rental property owners must balance tenant needs to retain more residents while at the same time maximizing ROI. Sometimes this involves balancing how you approach the situation. Your goal is to have the tenant renew the lease and get more rent for the property in the process. Today our Baltimore property management team delivers expert tips to avoid missing opportunities when it's time to renew a lease!
Know the Facts
Before effectively conducting a lease renewal that brings you more monthly income, you'll need a good grasp of current economic "facts." This involves researching the current economic environment for your local area and running a rental market analysis.
Start by learning about the current cost of living for the Baltimore area. You can also check the unemployment rate to give context to the job market and the demand for local housing.
In addition, knowing the going rental rate for a comparable home in Baltimore or the surrounding communities is beneficial. A property manager at one of the best rental management companies in the area can provide the information you need and conduct the rental market analysis to help you with accurate information when setting the rental rate for a lease renewal.
When you approach the tenant at lease renewal time, knowing the facts can help you increase the rate enough to boost your income without pricing your resident out of the property.
Be Reasonable With a Rent Increase
Although raising the rent may be essential during the lease renewal, it is something that must be done within reason. There is no benefit to raising the rent too high. Too much of a rent increase can lead to renters deciding not to renew the lease.
Instead, rely on the rental market analysis we mentioned and adjust the rent in small increments. This lets the tenant know you are not trying to overcharge them to stay for another term in your property but are raising it in alignment with the cost of living.
With the aid of a Baltimore property management company, you can handle this in a way that helps tenants respond well. For example, most renters expect the rent to go up at renewal, but it's important to let them know about a slight increase in a way that makes it simple for them to absorb the increase without forcing them to move to a cheaper rental home.
Make Sure You Increase the Rent Enough
Just like you want to be reasonable and not raise the rent too much, it's also crucial to ensure that you raise it high enough. Don't short-sell yourself if the data points to a higher rate than your renter is willing to pay.
So, how can you be sure that the increase will be adequate? Start by reassessing your overhead costs and operating expenses for the property to ensure you are receiving enough rental income to cover everything. Check with the tax assessor's office to find out how much your estimated property tax will be the following year. Also, research insurance costs to learn about any rate increases.
Be straightforward with your tenants. Communicate the facts about why the lease renewal will include a rent increase. For example, you can let them know that the costs have increased, and you must pass along a rent increase to keep up with expenses.
Provide notice at least 90 days before the renewal date to allow renters plenty of time to accept the new rate or find a new place to live. While these conversations can be uncomfortable with good renters who might struggle with a higher rate, property management professionals can handle this task for you.
Also, review your lease and make sure it mentions the possibility of a rate increase when it's time to renew. Make sure it is clear that the rental rate is for the current lease period and is expected to be higher in the upcoming year.
Offer Value Along With a Higher Monthly Rent
Everyone likes to feel like they are getting something for their money—even if it's only a small "something." Property owners can soften the news about a rent increase by offering tenants a value add-on for the following year.
Think outside the box if you've already provided them with incentives in the first year. However, if you haven't already done it, a resident benefit package is an excellent renewal incentive that can help renters sign on for another tenancy period. This package could include free air filter delivery, a one-time deep cleaning for the rental unit, or waiving specific fees with a new lease.
A Baltimore Property Management Company Helps Maximize Opportunities!
Raising the rent doesn't have to be stressful. Working with the property management professionals at Rentwell can take this task off of your plate! We help ensure you set the ideal rental rate for renewals while keeping your best residents for another lease term. If it's time to renew any leases, reach out to us to learn more about our property management services and how we can help!
Get more tips to improve ROI! Download a free copy of "10 Things to Increase the ROI for your Rental Property."