Business vs People dilemma - what would you do?

Question

Would you guys agree to extend tenants' lease by six weeks (until early July), knowing this makes you miss the peak rental season in this specific area? And knowing that in this case you'd be marketing your property at the same time as your next-door rental, thus having two properties  competing for the same high-caliber tenant pool?  And knowing that you'd have to wait with the showings until the tenants move out and the place is cleaned up, because otherwise it is not presentable?

And if you don't agree to extend, you'd be subjecting a family to a significant logistical nightmare. They would be moving to another state in July, but can't leave earlier since the husband has to finish his medical residency first. If I don't agree to extend, they'll have to put their belongings in storage, find and move into a short term rental for the remaining medical residency term, while also shopping for a place to rent in another state. This is difficult.

We had these tenants for three years. They pay on time and generally were good, but they did start a bit of a drama last month that required us to consult with an attorney. All good now, although the aftertaste remains.

We explained to them that lease extension this time of the year would hurt us. In response, they offered to pay double rent for June. I'm scratching my head. The extra month of rent would definitely help, but missing out on the main tenant demographic for this area (families with school-age kids) is still worrisome. My husband is absolutely against extending and insists we should think about ourselves first.

What would you do if you were in our shoes?

Mila F. · Answer

@JD Martin, thank you for your response, I only wish I saw it sooner. By the time I read it, I already had a lease extension signed (at double rent). I do like the idea of signing a new lease and then going through early termination when the time comes. I'll keep this in mind for future situations.

In general, there is a lot of wisdom in your post, particularly on landlord-tenant relationships. Thank you for this perspective, it's helpful.

JD Martin · Answer

I like the double rent thing except for one caveat: if for some reason anything goes wrong on their end, you'll likely be going through an eviction and then you will miss the peak season for sure.

The first question in my mind is if they're so great, why didn't they realize a year ago that their lease was going to end prematurely for their residency etc. and plan accordingly, i.e. negotiating a longer stay then instead of right now?

What I would do: I would make them sign another regular lease at a much higher rent rate (maybe not double) for a standard period of time - 1 year, if that's your lease term - and provide them an early termination option for $X dollars with X notice, or you can try to re-rent after they leave but they are responsible until you get it re-rented. My guess is they're probably going to balk at this, because they want you to take on all of the risk while they get all of the reward.

If they didn't want to sign the lease extension, I agree with your husband and would give them their walking papers. If you end up getting them gone at 10 weeks instead of 6, no one including a court is going to compensate you for having to accept lesser quality tenants.

PS: Almost always you should pick business over people, putting it the way you put it in your title. The tenants are not going to think, care, or provide for you in any way, shape or form after they move. You provide a place to live and that's it. I have had many, many tenants over the years, and I have liked the vast majority of them, and almost to a person have never heard from or seen them again when they moved on with their life. They don't send me Christmas cookies or volunteer to come trim the undergrowth that resulted from their short-shifting on mowing and edging. I rented them a house and they paid rent. That's the sum of it. I hate to sound heartless, but who cares if they have to move into short-term rentals while they find a permanent place? That's their problem. It's not as if the choice is between your house and the highway overpass.

Nathan Gesner · Answer

I find it hard to believe your peak season only lasts for those specific four weeks. Take his deal for the extra rent. He moves out early July but you'll still have money to cover all the way through July while you look for a renter. You shouldn't have any problem finding two renters in July.

Nathan Gesner · Answer

That makes sense. You can offset this a little by showing the home while it is still occupied by the current renter. Tell your Tenants they can extend with the additonal month of rent and an agreement to allow showings with 24 hours notice. I'm pretty sure you'll have a new tenant lined up before the current one vacates.

Theresa Harris · Answer

I'm not sure renting it out a month and half later really would affect the tenant pool that much in the summer.

Charge them a higher rent for the extension, tell them that you will schedule showings in the last month to get it rented and they need to have the place in showroom condition and make it available for showings (with 24 hours' notice and stacking showings as much as possible).  If they only want to extend it for 6 weeks, make sure that the total rent for that time exceeds the normal 2 month rent.  Having 2 weeks for turnover is not a bad thing when the tenant has paid for the rent.

Mila F. · Answer

@Josh Young, @Theresa Harris, @Nathan Gesner - Thanks for the advice, this is helpful.  I'm leaning now towards accepting their double rent offer, and just conditioning the extension on them allowing us to do some repairs while they are still occupying the property. This way we can cut the time needed to get the place rent-ready.

In terms of the peak season being questioned here - this neighborhood is zoned to top-notch schools and is highly desirable among families with school-age kids. However, schools start here early - on August 1, and most rental traffic takes place here during late spring-early summer. Families who are responsible and plan their moves  ahead of time (basically the type of tenants I want) tend to have a new place locked in by July.

Josh Young · Answer

@Mila F.

I would just charge them more than it’s going to cost you for the extra time. If it’s going to take you an extra month to get it rented because you miss the busy season then just charge them 2 extra months, that way you hope they stay so you will be making more rather than stressing that they are going to cost you money by staying.

January Johnson · Answer

A bird in the hand is worth 2 in the bush.  Agree with others who say keep the tenant - especially at the higher rate.

Theresa Harris · Answer

Hopefully that is just with their decorations and nothing permanent.

Business vs People dilemma - what would you do?

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