To renew (lease) or not to renew?

Question

Hey all, in December 2023, my contract with one of my rental properties and tenant in Montgomery County, MD will expire.

My options are to renew the lease w/ a 3% rent increase or give notice to my tenant and find a new tenant.

To provide context, my current tenant has been in the property for 2 years and has paid late several times and on at least two occasions had the payment bounced back for non-sufficient funds, however he has always eventually paid.

My rental property thinks I should find a new tenant which will cost me $450 to re-market and then however much it will cost me to turn the property (probably paint, patch and any wear and tear). Also, if he is moving out in December, I dn’t want the property vacant until march.. so I wanted to get you alls opinion on this matter?

Thanks for any insight!

Russell Brazil · Answer

Increase the rent to market rate. No reason to only raise it 3%

Tim Ray · Answer

@Nathan Gesner awesome response. My property management company is who suggested a 3% increase. I’m unsure where or how they got to that number. You’re right about getting someone who pays on time and for the appropriate price, thanks for the feedback.

Nathan Gesner · Answer

1. Why are you limited to a 3% increase? Is that the market rate, or does state law limit you?

2. Renewals are for good Tenants you want to keep. Multiple late or NSF payments is grounds for non-renewal. My policy is that I won't renew someone with three or more payment issues in a year.

3. Losing 1-2 months of rent for vacancy is much cheaper than dealing with a tenant that stops paying and takes 1-2 months to get out, then another month or two of vacancy looking for a new tenant.

If the lease doesn't end until December, give the Tenant notice of non-renewal at least 30 days in advance and start marketing it. If you are priced correctly, you can typically have a new tenant in place within 1-2 weeks of him leaving. This minimizes vacancy but allows time for turnaround.

Laura Stayton · Answer

You could also offer them a month-to-month lease to see if they can re-establish a good payment history without locking in for another year. You can offer it at a 3% increase and see if they get back on track and if they pay well for 4-5 months offer them a renewal or give them notice then at a better time of year.

Tim Ray · Answer

@Bud Gaffney Yup, decision was made. All around solid responses. Thank Bud.

Tim Ray · Answer

@Matthew Paul true, however it’s in a awesome location and my property mgmt company does a great job at screening tenants appropriately. Thanks for the response.

Bud Gaffney · Answer

@Tim Ray no renewal.

Matthew Paul · Answer

You could not renew , and then get a worse tenant . You at least know what you are dealing with now

Tim Ray · Answer

@Bob Stevens haha, Just trying to make smart business decisions - thanks for the feedback!

Tim Ray · Answer

@Russell Brazil smart business decision. Thanks for the feedback!

To renew (lease) or not to renew?

To renew (lease) or not to renew?

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