I just read through a BP blog post about how to avoid potentially long vacancies for tenant leases that end in the fall/winter.
I'm closing on the rental property at the end of this week, in December. One amazing tip for owners closing on rental properties in the fall/winter was to have the first tenant's term end/renew in June, so I can take advantage of the peak moving season.
Therefore, it looks like I'll need to...
- Modify the first tenant's lease agreement to state that the lease would end on May 31st (or 6 mths from the date of the agreement if, for instance, I find the tenant in the middle of January)...
- ... and also inform all prospective tenants, in advance, that the first lease will be 6 mths long but every successive lease term would be 1 yr long.
Sound about right? Am I missing anything? I don't see any prospects taking issue with this as long as they have the option to renew their lease (provided we have a good landlord-tenant relationship during the first shortened term).
Thank you in advance!
They are on a month to month lease? The best thing to do would have been to have the previous owner renew their leases for a 6 month term as a condition of the sale. But thats more than likely not an option anymore if you're closing at the end of the week. Check the current lease and see what the move out notice they have to give is, chances are they only have 30 days, but the previous landlord could have wrote in higher. I had 60 days with my inherited tenants.
What are the current tenants like? When you walked the property are they clean? Are the rents at market value? It takes a lot of effort to move and if you're in a colder climate chances are they dont want to move either. Id say signing a lease with unknown tenants just to insure they dont move out is a waste. Depending on the tenant and how long they have been month to month, you taking over and wanting a lease signed could cause them to move out.
My fault! The property is vacant!
This would be for a brand new tenant...
You could start them off on whatever term lease gets them to your desired date, say 6 months. That might turn off some renters who would be afraid of you not renewing forcing them to move, or you raising the rent. The other downside is that they might leave after 6 months, and turnover has costs. To mitigate that, you could offer an 18 month lease. Downside is they could turn out to be bad tenants and a long lease could turn them off too. If you want to get really fancy there is what some of the big apartment buildings do. They offer any lease term you want, but they just charge different amounts for the different periods to guide you into an optimal renewal time for them.
Personally, given my market, I would just do the 1 year lease with a 60 day renewal. Approach them ~80 days before the lease is up, and ask if they want to resign and at this point ask them to sign a 6 month lease to get on track with a June move out date. At this point you should have some sort of professional relationship with them. Give them a week to decide and you have 70ish days to find a tenant if they dont want to resign.
Thanks so much, @Adam Gollatz . That's a nice list of options!
I'm in the Raleigh-Durham area of NC. I've noticed a few available comparable rentals in my vicinity that have been on the market since October-ish... Unless the managers just haven't updated the status of those rentals, I'm thinking my rental market is not great during fall/winter...
I'll inform prospects of an initial 6-mth term and check for their reactions. I may have to adjust to 1-year lease term if that turns them off.
Thats why they call it the art of negotiation. If you're close to the city or universities, you should have a more or less year round market. If your dead set on the 6 month to get that schedule, present them with a year lease and a 6 month lease at a small discount with the expectation that it goes up if they resign. Chances are they resign because no wants to move after 6 months and you put them at ease with the rent increase.
Im going through a tenant search right now, and its honestly not that bad. Since 11/7 Ive had 18 responses on zillow, probably 10 from craigslist, and another 3-4 that just dialed my number. Id say maybe 10 were truly viable candidates.
@Adam Gollatz Ah. Got it. Yes - I do live near a bunch a few universities.
Good - I'll offer the discount option for 6-mth term!
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