Over 44 million American households are renters. Offering lease renewals ensures you have a tenant in your investment property without needing to go through all the schlep of doing a new tenant background check. This might sound like the perfect option for all landlords, but keeping a tenant on for another lease term can also have some downsides.
Keep reading to find out more about lease renewals and whether they are a good thing for landlords.
What Is a Lease Renewal?
A lease renewal simply extends the original lease. This allows the current tenant to keep living in the rental property based on the guidelines of the original lease.
A lease renewal is generally offered three months before the end of the current lease. This gives the tenant and landlord enough time to make a decision and plan for any changes.
Benefits of a Lease Renewal
When you offer a lease renewal, you get the opportunity to retain good tenants. Tenants are a dime a dozen, but good tenants are a lot harder to find, so if you do manage to land one, you'll want to keep them for as long as possible.
The tenant screening process is also incredibly tedious and time-consuming. Your current tenants already passed all the checks, so you don't need to do it all again.
Your current tenants will also already be familiar with the situation. They'll know who to call if there's a problem instead of bothering you about everything.
Offering a lease renewal also means you don't have any turnover costs. You won't have to do any cleaning or maintenance to prepare for a new tenant. The property also won't stand empty while you're screening new tenants.
Disadvantages of a Lease Renewal
Since the tenants won't be moving out, you won't be able to schedule any maintenance on the units. While this can also be a benefit in the short term, in the long term, your unit will become more dated and require more extensive maintenance later on.
Dealing with bad tenants is never fun. Cutting them loose might be a better option than retaining them. While the guaranteed income is a good incentive to keep them on, problematic tenants usually aren't worth the hassle of renewing a lease for.
You also run the risk of your tenant's true colors showing. They might seem to be the perfect tenants initially, but if they feel you've become complacent, they might become problematic. You don't want to run the risk of needing to file for eviction down the line.
A Landlords Guide to Lease Renewals
When it comes to lease renewals, each landlord will have a different outlook on them. There are pros and cons to both sides, so you'll need to use your judgment and real estate market knowledge to drive your decision.
If you have any questions regarding lease renewals, please feel free to contact us today. Blue Ribbon Property Management helps you take the stress out of dealing with tenants.
