Having a vacant property is often the biggest expense a landlord can incur. When you take into account the costs of advertising, days on the market, getting it rent-ready, and the monthly mortgage costs you still have to pay, the totals quickly stack up. So when you finally find a good tenant to rent your property, holding on to them becomes significantly important. So let’s talk about three reasons why it may be more cost effective to renew with your current tenants than to start the leasing process over again.
#1- Turnover is Expensive
Whether you’re renting your home because circumstances require it or you purchased your property as a rental, the goal is to make money. It’s an investment, after all. That being said, you can’t make money on your investment if it’s vacant. This makes tenant turnover one of the biggest expenses a landlord can incur. Your mortgage company still expects payment. You must market the property to find a new renter, which takes time and money. And even if your previous tenants left the home spotless, there are still maintenance items you’ll have to address to get it ready for the next ones.
#2- Renewal Rates vs New Lease Rates
Rental rates depend on what the current market says a property is worth. Our data over the last year shows that owners who chose to renew with their current tenants vs starting from scratch actually had higher increases in rent. Moving is expensive, and if you offer your current tenants a reasonable rate and they’re happy where they’re at, odds are they’ll choose to stay. If they stay, you don’t have to deal with a vacancy period or have to continually reduce your price to attract a new renter.
#3- Why Change What Works?
If you have a tenant who is happy, pays on time, follows the lease, and maintains the property well, it makes sense to hang on to them. After all, good tenants can be hard to come by and you never know what challenges you might run into with a new pool of renters. While you can screen for credit, criminal, and rental history, accounting for changes in life circumstances isn’t possible. People lose their jobs, face divorce or health issues arise. You may even run into new tenants who require a lot more hands-on management than previous ones. Holding on to good tenants is well worth negotiating on the rent and the lease length. You can’t have too much of a good thing!
Tenant retention is key to making a profit on your real estate investment. If your rental is vacant, not only are you generating $0 income, but you end up owing, too. So when it comes time to renew the lease on your rental, make sure to discuss the benefits of tenant retention and whether or not it makes sense to hang on to the ones you have.