Good tenants are worth a lot more than just the rent. Obtaining lease renewals can be an owner’s most productive activity. Resident turnover, which is estimated by the Institute of Real Estate Management to be 55.1 percent nationwide, carries many hidden costs.
Top 4 Typical Expenses with Turning-Over your Rental
- Common areas may be damaged during the move. Wall damage, door dings, carpet snags!
- The property will need cleaning and may need a new carpet or other redecorating. Tenants rarely leave a property “move-in” ready.
- Time, energy and money must be spent on finding a new resident and showing the property. How much is your time worth? Phone calls, applications, cleaning and more!
- Lost rent from a vacancy. You may not find a suitable resident right away and the apartment may stand empty for a month or more. Even without lost income, it can easily cost three to four hundred dollars each time a resident moves out and a new resident moves in.
Renew good tenants and save hundreds. Look at the savings!
- No advertising.
- Maintenance, decorating and administrative expenses are substantially reduced.
- No cleaning, no applications to review, no phone calls to manage.
- The risk of damaging the halls, stairwells, doors and elevators is eliminated.
Thus, it is important that every effort be made to renew leases of desirable residents. Of course, not all residents are good candidates for renewal. Do not renew residents who are slow rent-payers, who have many late charges, who have unauthorized pets or have created noise or nuisance problems. Procedures for not renewing a resident are listed.
The current market condition will influence how strictly you will adhere to the general policies and procedures discussed in this text. For example, if the market is soft and you have a large number of vacancies, you might decide to renew a resident who has been slow in paying rent, but has otherwise been a good resident.
Owning rental property now is much different than it was many years ago. Ten years ago families began by renting and then hoped to buy their own home as the family grew and they became established. Many factors have changed. Families are smaller on average than in the past. However, most responsible for the long-term rental cycle is the fact that the average price of a home continues to rise. In the very recent past a drop in interest rates has spurred the few who can afford a home to make the jump, but many just cannot afford a home of their own.
This influences how we as owners must view our properties. Many people will call our properties home for an extended time. We need to keep this in mind and think of our properties in a different prospective. This is not just a place for them to stop temporarily, this is their home. Because of this it is of vital importance that you choose the right resident and that you provide them with excellent service. A good resident can be your dream come true. They will be loyal, faithful, and profitable for you. Spend time with your residents establishing a long-term relationship.
Renewing a lease begins when your tenants move in
The process of renewing a lease begins the day a resident moves in. Your attitude, your professionalism and your approach to dealing test the possibility of obtaining a lease renewal daily with residents. There is no substitute for dealing fairly with all residents.
The less time you have to spend finding new residents the more successful you will be. It certainly means more profit. Long-term, stable residents mean, not only an uninterrupted stream of rental income and fewer turnover costs, but also lower maintenance costs since these residents take better care of the property.
For good residents it is important to set up a reward system of some sort. Be creative. For example, you can help them celebrate their anniversary with you. When they have been with you for a year, do something for them to show them you appreciate them. Encourage them to stay many more. Ideas I’ve heard range from discounts on rent to allowing them the use of your handy man for the day.
These types of goodwill builders really pay off. Your residents will see that you care and word will spread. Word of mouth advertising is more effective than any other medium. It is also the most valuable. Can you imagine being able to fill your few vacancies with applicants that have been referred to you by an excellent resident? Happy renting.