Timing of Renewal notices/rent increases
Investor · Mansfield, TX · Member since 2017 · 35 posts · 9 votes
Timing of Renewal notices/rent increases
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Member since 2016 · 13k+ posts · 12k+ votes
9yYou would probably be farther ahead to send a notice of non renewal and find a good tenant. If you decide to keep him at the end of his lease keep him on a M2M lease. That way if he pays late again you can non renew and be rid of him quickly. You will learn when you are in the business long enough that PITA tenants are never worth keeping.
20 Replies
- 9yKim Meredith HamptonBusiness MemberReal Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
@James M Smith First take a look at your landlord tenant laws for Texas. It will outline how much of a notice is sufficient. "Usually", i use that loosely, because we are all in different states, all you need to give is a thirty day notice prior to the end of their lease, or thirty days before the next rental period if they are on Month to Month. Our landlord tenant attorney does not allow us to give anybody renewal or non renewal 90 days out. Things can change quick in 3 months timeframe!!
- Member since 2016 · 13k+ posts · 12k+ votes9y
You would probably be farther ahead to send a notice of non renewal and find a good tenant. If you decide to keep him at the end of his lease keep him on a M2M lease. That way if he pays late again you can non renew and be rid of him quickly. You will learn when you are in the business long enough that PITA tenants are never worth keeping.
- Investor · Mansfield, TX · Member since 2017 · 35 posts · 9 votes9y
Hey Thomas, Thank you for the quick response and I agree with you but also have a partner. I would have already evicted at this point but partner wants to see if we can get them shaped up with proper management (late fees, notices to quit, etc). When do you start providing renewal notices with rate increases on your leases? (I understand Canada can have some strict requirements about notices). Thanks again
- Investor · Mansfield, TX · Member since 2017 · 35 posts · 9 votes9y
Originally posted by @Kim Meredith Hampton:
@James M Smith First take a look at your landlord tenant laws for Texas. It will outline how much of a notice is sufficient. "Usually", i use that loosely, because we are all in different states, all you need to give is a thirty day notice prior to the end of their lease, or thirty days before the next rental period if they are on Month to Month. Our landlord tenant attorney does not allow us to give anybody renewal or non renewal 90 days out. Things can change quick in 3 months timeframe!!
Hi Kim, Thank you for the information! I did check the Texas Residential Property Code and there are no restrictions around renewal notice, only that you provide 30 days before the termination of the lease. I was in the same line as you that 90 days was probably a little too long of notice but also want to ensure that I am following the "Golden Rule". I bought my first house at 18 and have never been a tenant but I would want advanced notice of rent increases to allow me to survey my options. No matter what, requesting it 5 months in advance and being upset about 90 days is a bit absurd.
- Member since 2016 · 13k+ posts · 12k+ votes9y
In my jurisdiction we are required to give 90 day notice for rent increases. I give notice of rent increases annually without fail.
We do not have the right to non renew a tenants lease and must keep tenants till they decide to leave or if we have grounds to evict. Eviction however is nearly impossible except for non payment of rent and even then is very difficult.
- Dallas, TX · Member since 2016 · 1k+ posts · 745 votes9yITs different in Dallas. landlord has the right to renew or not renew. The notice to not renew I seem to recall is in the standard lease. I think ours are 60 days. When we inherited some tenants from a duplex we owned, we talked to the tenant and I think we gave him a month or two to find a new place and move out. In our case he wasn't a terrible tenant, a little messy/dirty, but the big issue was his rent was under market and he was unwilling to pay more (he was in a month to month situation.) If I was in your shoes, I would work with the existing tenant to find a different place and get them out of your place. IMO its not worth it to try and fix a bad tenant, it wont happen and all you will end up doing is costing yourself money and time.
Originally posted by @Thomas S.:
In my jurisdiction we are required to give 90 day notice for rent increases. I give notice of rent increases annually without fail.
We do not have the right to non renew a tenants lease and must keep tenants till they decide to leave or if we have grounds to evict. Eviction however is nearly impossible except for non payment of rent and even then is very difficult.
- Member since 2016 · 13k+ posts · 12k+ votes9y
Novice landlords rarely understand that a late paying tenant all to often ends up in a eviction costing far more than any compensation from late fees. This usual arises from their attempt to retrain. It is less expensive to replace a late paying tenant than retrain or retain a late paying tenant.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes9y
Originally posted by @James M Smith:
Hey Thomas, Thank you for the quick response and I agree with you but also have a partner. I would have already evicted at this point but partner wants to see if we can get them shaped up with proper management (late fees, notices to quit, etc). When do you start providing renewal notices with rate increases on your leases? (I understand Canada can have some strict requirements about notices). Thanks again
Show your partner this thread. You're not going to retrain the tenant with late fees and notices to quit. Reasonable people don't need to receive either, and unreasonable people are not going to be that responsive to same.
I would simply decline to answer their question. If you must answer, I would phrase it along the lines of "Renewal rates will be in line with current market rates at the time of renewal". If they know that they're getting a $1000 place for $700, that should tell them all they need to know.
Skyline Properties - Architect · Papillion, NE · Member since 2015 · 1k+ posts · 840 votes9y
This is great advice from the veterans / pros of BP! The only thing I can add is to print out and read your tenant landlord laws for your state. Back check the lease to the laws. Welcome to BP!
- Investor · Mansfield, TX · Member since 2017 · 35 posts · 9 votes9y
I would like to thank everyone for their contributions to this discussion. I really do appreciate the different views and ideas around this topic. It has been very helpful!
@JD Martin, That is exactly what I did. (Good to know it wasn't a mistake) I suggested they look on Zillow and Rentometer.com to see what comparable homes are renting for in the market. They sent me some pretty heated texts after that (they are paying 1,350 and market is around 1,750). With late fees, they are paying about 1,500 per month now. We were considering renewing them at 1,600. Since carpet needs to be replaced and the interior of the house needs to be painted we figure we wouldn't ask top of the market price. The struggle with this tenant is that they signed a 2-year lease about $50 per month lower than the market at the time they signed. So, any attempts to get them close to market makes them feel like it's a ridiculous increase.
I am in agreement that non-renewal is a very tempting option in this situation. If they are chronically late now what makes us think they can pay on time when we increase the rent. However, I can also see my partners position that if we don't renew, we incur turn costs, (renovation, vacancy, etc.)
@Jim Adrian, I absolutely agree. I actually researched in the Texas Residential Property code before I even posted on this forum. Considering my state doesn't have requirements I was wondering what the more experienced landlords were doing. I have made it a point to read the Texas Residential Property Code cover to cover multiple times and always refer back to it when I have questions or feel like I need a refresher.
- Investor · Dallas, TX · Member since 2015 · 25 posts · 3 votes9y
Hi James, I'm a landlord in Dallas so may be able to help. We don't give renewal notices that far out, since, as someone else already said, a lot can change in 90 days, especially in this market. We general will go out 30 days and give the tenant a few options ... a rate for a standard 1 year extension, and a bit lower than market rate for a 2 year extension. We'll also give them the stats of the rental market in their area (specific to the subdivision if possible) with links to currently available houses. Finally, sometimes we'll agree to lower the rent to slightly below market if they agree to make some repairs that are needed on the house (ie maybe repaint [we supply paint] if we trust their skills). This has worked as a win-win for us in many cases. Hope this helps!
- Dallas, TX · Member since 2016 · 1k+ posts · 745 votes9y
Originally posted by @Russ Olivier:
Hi James, I'm a landlord in Dallas so may be able to help. We don't give renewal notices that far out, since, as someone else already said, a lot can change in 90 days, especially in this market. We general will go out 30 days and give the tenant a few options ... a rate for a standard 1 year extension, and a bit lower than market rate for a 2 year extension. We'll also give them the stats of the rental market in their area (specific to the subdivision if possible) with links to currently available houses. Finally, sometimes we'll agree to lower the rent to slightly below market if they agree to make some repairs that are needed on the house (ie maybe repaint [we supply paint] if we trust their skills). This has worked as a win-win for us in many cases. Hope this helps!
We have gotten burned in the past on offering a discount on a long term lease. Often the tenant will break the lease early and you are left holding the bag on a year or so of discounted rent.
What we do instead is if the rent is $1,300/M and we are willing to do $1,250 a month if they got 2 years, We would charge $1,300/month with a the entire discount given in the last month of the lease if all rent payments are made on time. IE 23 months of $1,300, 1 month of $100.
That way if they flake on the last months of the lease, or pay late, then there is no discount to be given in that last month.
- Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes9y
Texas law does not address the term needed for rental increases. However, a 30 day notice is required to terminate a lease(which is what one would do to begin a new lease or renewal) so in reality 30 day notice is required to renew a lease. Individual leases could contain longer requirements but 30 days would be the minimum
I cannot suggest strongly enough not to rely on services such as Zillow and Rentometer in Texas. We are a non disclosure state, meaning they have no access to sales prices or even rental prices. Their software is a pure guess
- Investor · Dallas, TX · Member since 2015 · 25 posts · 3 votes9y
Great idea @Bart H.!
- Investor · Mansfield, TX · Member since 2017 · 35 posts · 9 votes9y
Thanks for your input, what sources would you use in Texas to set your rental price? We seem to have been lucky since we get a fair amount of interest but never have folks knocking down our doors. We have 3 units and all were priced using those tools. Specifically, we use the current homes for rent not the "Zestimate" from Zillow. However, if there is a better tool I would love to know about it.
Also, I agree 30 days would be the minimum and I personally think 60 to 90 is where I am comfortable. Based on the input from the other users I will probably start my research at 90 days and plan on delivering it before the 60-day mark.
Perhaps I am too nice but If I were in their shoes, especially if there were a big increase, I would want some time to assess my options. We want people who want to be in the house and recognize the value they are getting. Not people who think they didn't have any other options. I know we give our renewals a fair renewal rate and one that if they want to stay in the same market they won't be able to beat (like for like) and I want them to have time to figure that out for themselves instead of me having to tell them. This also gives me advanced notice if they won't be renewing so I can start my marketing campaign.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes9y
Originally posted by @Bart H.:
Originally posted by @Russ Olivier:
Hi James, I'm a landlord in Dallas so may be able to help. We don't give renewal notices that far out, since, as someone else already said, a lot can change in 90 days, especially in this market. We general will go out 30 days and give the tenant a few options ... a rate for a standard 1 year extension, and a bit lower than market rate for a 2 year extension. We'll also give them the stats of the rental market in their area (specific to the subdivision if possible) with links to currently available houses. Finally, sometimes we'll agree to lower the rent to slightly below market if they agree to make some repairs that are needed on the house (ie maybe repaint [we supply paint] if we trust their skills). This has worked as a win-win for us in many cases. Hope this helps!
We have gotten burned in the past on offering a discount on a long term lease. Often the tenant will break the lease early and you are left holding the bag on a year or so of discounted rent.
What we do instead is if the rent is $1,300/M and we are willing to do $1,250 a month if they got 2 years, We would charge $1,300/month with a the entire discount given in the last month of the lease if all rent payments are made on time. IE 23 months of $1,300, 1 month of $100.
That way if they flake on the last months of the lease, or pay late, then there is no discount to be given in that last month.
I like this idea. We don't do leases that long but I would be tempted to try it even on a shorter lease for one good reason - anyone who signs up for it is confident in their ability to pay 11 (or 23, whatever) months of on-time rent in order to get a major perk at the end. It ends up being slightly self-selecting in terms of weeding out people who have their doubts about on-time payments (or about flaking out at the end).
Skyline Properties - Investor / Vendor · San Diego, CA · Member since 2016 · 1k+ posts · 949 votes9y
Originally posted by @Bart H.:
Originally posted by @Russ Olivier:
Hi James, I'm a landlord in Dallas so may be able to help. We don't give renewal notices that far out, since, as someone else already said, a lot can change in 90 days, especially in this market. We general will go out 30 days and give the tenant a few options ... a rate for a standard 1 year extension, and a bit lower than market rate for a 2 year extension. We'll also give them the stats of the rental market in their area (specific to the subdivision if possible) with links to currently available houses. Finally, sometimes we'll agree to lower the rent to slightly below market if they agree to make some repairs that are needed on the house (ie maybe repaint [we supply paint] if we trust their skills). This has worked as a win-win for us in many cases. Hope this helps!
We have gotten burned in the past on offering a discount on a long term lease. Often the tenant will break the lease early and you are left holding the bag on a year or so of discounted rent.
What we do instead is if the rent is $1,300/M and we are willing to do $1,250 a month if they got 2 years, We would charge $1,300/month with a the entire discount given in the last month of the lease if all rent payments are made on time. IE 23 months of $1,300, 1 month of $100.
That way if they flake on the last months of the lease, or pay late, then there is no discount to be given in that last month.
What a great idea Bart! Never heard of this one. Is it ok to share your 'legal verbage' of it? Not sure how I would insert it into one of my own contracts.
- Burleson, TX · Member since 2016 · 87 posts · 6 votes9y
@James M Smith, I have a rental house in Mansfield TX. I have the same boat with you about thinking increasing the rent. Currently we have M2M tenant and charged them under market value $1595 for 2042 sq ft house. We are kinda waiting till the tenant start giving good payment again after she had an issue late payment for 3 months in the past because of her circumstances. So we were giving the opportunity to straighten up the tenant financial issue basically she wasn't her intention to do it and she is been a good tenant. And she is only been renting since June 2016 so little over a year. With the cost insurance and taxes increases over 20%, when i should to make price increase ? other side we are kinda don't want to freak her out.
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