Everything You Need to Know about Lease Renewals

Before offering your tenants a lease renewal, consider if they are tenants you want to keep in your unit. Do they pay on time? Do they keep your unit clean and undamaged? If they don’t pay on time, or they’ve been hosting wild parties, it’s better to find more responsible tenants.

However, if you have great tenants who pay rent on time and take care of your investment property, then we strongly recommend you offer them a lease renewal. There are four benefits of offering a lease renewal:

Why is it beneficial to renew your lease?

Save Money

Renewing a lease helps you save money by eliminating the cost of finding new tenants. Finding new tenants can cost you hundreds of dollars, including the cost of marketing your unit, screening tenants, updating your unit, and cleaning your unit. In a survey, our landlords reported spending about $100-2500 every time they find new tenants. About 99% of our landlords ask for a lease renewal before trying to find new tenants in an effort to save themselves up to $2500.

Save Time

Not to mention, you’ll save the time it takes you to market your unit, screen tenants, review applications, show your property, and sign a new lease. The entire process can take up to 15-20 hours, depending on how many applicants you have. That’s time you could be spending with your family or doing something you love.

Avoid Bad Tenants

It’s beneficial to have current tenants renew because it reduces your risk of renting to a bad tenant. Even if you thoroughly screen your tenants, there’s still a possibility that you’ll end up with a bad tenant. Bad tenants don’t pay rent on time, they damage your property, they create expensive legal headaches, and they don’t stay in your property very long, which means you’re back to finding a new tenant.

If your current tenants are responsible, good neighbors, and pay rent on time, then they are tenants you want to keep around. Renewing your lease can offer you peace of mind that you'll have great tenants.

Avoid a Vacancy

By renewing your lease, you’ll avoid having your unit sit empty. Vacancies cost you a ton of money because you’re not making income on your property, but you’re likely still paying your mortgage and other expenses. A lease renewal gaurantees that your unit won't be vacant. 

What if your tenant wants a month-to-month lease?

Month-to-month leasing is an agreement where the lease renews automatically each month until either you or your tenant provides 30-day notice of the lease expiring.

This is a great option for keeping a tenant past the lease expiration date. However, it’s not as ideal as a lease renewal because month-to-month leases are designed to be temporary. They are also unpredictable. At any point, your tenant can notify you that he or she is leaving in 30 days.

Overall, month-to-month leases are a great way to continue renting to a good tenant.

How do you renew your lease?

When you renew, you have to sign a new lease, even if you aren’t changing the terms of the lease. As you’re drafting your rental lease, you’ll want to update the end date of the lease. Keep in mind that lease renewals don’t have to be a one-year renewal. They can be anything you agree upon with your tenants- whether it’s an extra three, six, nine months, or even two years. Renewing your lease is also an opportunity for you to raise your rent price (if it makes sense in your rental market).

Keep in mind that you are legally responsible for re-disclosing all addendums when you re-sign. This includes mold and bed bug addendums.

After you’ve finalized your new lease, then both parties should review and sign.

Depending on your location, you also may need to complete the following steps:

• You may be required to increase the security deposit to keep the deposit equal to rent.
• You may need to pay your tenant interest on his or her security deposit.

Conclusion

Renewing your lease is a great way to save yourself time and money. Keeping quality tenants helps you avoid the headache of finding new tenants. Plus, you won’t have to risk renting to bad tenants or having a vacant unit.

Read more to learn 7 ways to improve your rental lease.