6 Things to Consider Before Your Next Lease Renewal
Renewing your lease? There are lots of things to consider! Check out these 6 tips before your next renewal
Lease or Rent Renewals: 6 Things to Consider Before Your Next One.
It's important to approach renewing your tenant's lease with confidence and make well-informed decisions. In this article, we'll provide you with valuable insights into key topics such as rent adjustments, lease durations, and property inspections. Our goal is to equip you with the information necessary to ensure a successful lease renewal process, benefiting both you and your property.
What a Lease or Rent Renewal?
A lease or rent renewal is a process of renewing your tenant's lease, which occurs when the original lease term has expired and you or the tenant expresses interest in extending their stay.
During this stage, you will need to consider whether you want to proceed with renewing the existing lease, and this may involve making certain adjustments, such as evaluating rental increases or modifying the duration of the lease better to suit both you and the tenant. This ensures that all parties are satisfied and that the rental agreement meets evolving circumstances and expectations.
The Benefits of Renewing an Existing Lease
Cost Savings
One of the major benefits of renewing an existing lease is cost savings. You avoid having to pay for advertising or marketing costs to find new tenants. Additionally, you don’t have to pay for cleaning, painting, and other costs associated with the turnover of tenants. Winning!
Fewer Vacancies for Increased Stability
Another benefit of renewing the lease is that it helps to reduce vacancies. When a you and the tenant decide to renew their lease, it translates to a continuation of income for you as a landlord, without the need to search for a new tenant. This consistent rental income contributes to financial stability and predictability in your property investment.
Renewing a lease with a reliable and responsible tenant provides continuity and peace of mind for both parties.
More Stable Cash Flow
Which takes us to cash flow. Renewing an existing lease helps to provide you with more stable cash flow. Knowing that your tenants are likely to renew their leases every year means you can budget and plan better for the future. This allows you to focus on providing quality service to your tenants while ensuring your rental property is as profitable as possible.
Better Tenant Relationships
When tenants renew their lease, it indicates that they are happy with the property and want to stay longer, which can lead to stronger relationship over time. Landlords who have good relationships with their tenants are more likely to be successful and lead to more cooperative interactions and open communication - a happy environment for all!
6 Things to Consider Before Your Next Renewal
1. The Current Market
One of the most important things to consider when deciding on a rent renewal is the current market. Consider any changes in the local market, such as increases or decreases in demand for rental properties and use this information to determine what kind of rent increase you can reasonably propose.
You should research similar properties in your area to understand what other properties are current renting for.
2. Length of Lease
When renewing a tenant’s lease, you should also consider how long the new lease should last. Generally speaking, leases over one year offer stability and security for both parties involved.
However, if you think there may be significant changes in the market over a year or two, then a shorter lease may be more beneficial.
3. Type of Agreement
You should also let the tenant know their options when renewing your rental agreement. If they’re interested in staying, you can offer them the chance to sign a new fixed-term lease, or you might be willing to let them stay on a month-to-month basis (also called a periodic agreement) if that works better for both parties.
4. Property Inspections
It’s also important to consider whether or not you will be conducting a property inspection before the lease renewal. Regular inspections can help ensure that tenants take good care of your property and that any maintenance issues are addressed quickly and efficiently.
However, it’s important to note that each state has laws regarding how often you can inspect the property. So make sure you familiarise yourself with these before making any decisions.
Read more about how often you can inspect the property here.
5. Rent Increases
When deciding on how much to increase rent by when renewing a lease, it’s best practice to start by considering their current rent amount compared to similar properties in your area and then adjust accordingly based on any changes in the market since they first moved in (e.g., increases or decreases in demand).
Whilst it is common to have an annual rent increase, it's equally important to evaluate whether this decision might lead to the departure of a good and reliable tenant, and if that risk is justified. It's important to keep in mind that with a new contract in place, you won't have the flexibility to adjust the rent until the current lease term ends.
6. New Terms and Conditions
Before signing onto a new lease agreement with a tenant, review all terms and conditions so that both parties understand what is expected from them throughout the new lease period. This may include things like pet policies, maintenance requirements, and other details about living in the property.
If you have tenants with pets or perhaps are wanting a pet in the future, then it’s important to ensure that both parties are on the same page. Consider where you stand on the topic in line with the regulations in your state and ensure it's written into the agreement.
Read more about pets in Australian rental properties here.
RentBetter can help take the work away!
Renewing a lease with a tenant doesn't have to be a stressful experience - by maintaining open and transparent communication regarding all expectations, the process can be made much smoother.
RentBetter is here to simplify property management for owners, with our comprehensive and user-friendly platform. You can effortlessly advertise your property on major portals, screen potential tenants, and manage ongoing tenant relationships. Our system swiftly handles rent collection, aids in organising repairs and maintenance, and facilitates seamless communication between you and your tenants.
Every aspect of RentBetter is designed with the goal of saving you time and reducing stress, allowing you to focus on other important matters!
