Renewing Leases is the goal of everything we have talked about this week – keeping your good tenants. The more lease renewals you have, the better your business is doing. While it may be difficult to directly address the amount of lease renewals you get, you can certainly ask those people who don’t renew for their thoughts. Before we get into talking full bore about this, I just wanted to touch on raising the rent.
The one move you can make which – despite all your other work – can have a direct negative impact on your ability to keep people renting with you is to raise the rent. The problem is that over time, it is usually necessary to do so. When you raise the rent, even if the tenant can afford it, this can leave a sour taste in their mouth – be sure you fully understand where your tenants are coming from before you raise rent.
As an example (again, my oft mentioned disastrous past living situations): In a previous apartment building, I moved in at a certain level of rent – at the time, they were desperate to fill the building (because it was new) and provided a very affordable rate. Now, I was expecting certain increases when it came time to renewals, and after the first year, they only increased my rent about 5% – no problem. The second year, after the ground floor businesses filled out, they decided to increase rent not by another 5%, but by almost 30% – their justification being that they figured they could fill it fast. I and a number of other people left – and perhaps they did fill the vacancies quickly, but even doing so turning over vacancies is a far greater loss than simply raising rent by a small amount and waiting (plus they now have a terrible reputation).
People expect fair, competitive, and equitable treatment. Don’t think you can keep secrets from tenants, and if you do decide to make a big move because you think it won’t cost you, think again and consider not just the repercussions of turning over many tenants, but also upon your reputation and what that can mean for the future of your business.
If you are in the habit of increasing rent slightly with each renewal, you may in fact consider what it would cost you to provide a slight decrease in rent with each renewal. After all, you can consider the fact that you won’t have to do any major repairs or refinishing on the unit, you won’t have to find someone to fill it again, and if you are dealing with a good tenant then you have the assurance of keeping someone who pays their rent on time, doesn’t make a fuss, and is clean. You may not be in a position where you can lower rent, but you should look at the costs of these things over time – you may find that lowering or preserving the current rent proves to be far more profitable over the long period.
That all of course depends on your local rental market. In a competative market, it is certainly possible to increase rent slightly every time you renew the lease and most tenants will likely accept that (provided the rent increase is fair and you aren’t gouging them simply because you can).
Some people also leave rentals with the goal of purchasing a house – but if you can determine this, consider it an opportunity to teach tenants about the value of renting and saving (to put more money down vs being more in debt when they do buy). Regardless of the outcome, most people will consider your care and attention to be appreciated.
As previously stated, it always comes down to how you treat your tenants – treat them well, and they will stay with you long.