Lease renewals on small rentals: when I raise rent and when I keep a good tenant

Managing Your Property
4dFollow

Lease renewals on small rentals: when I raise rent and when I keep a good tenant

BJ Everson
Realtor · Columbus, Franklin County · Member since 2026 · 135 posts · 53 votes

On 1-4 unit rentals, a renewal is not just a rent decision. It is a vacancy and turn decision. Here is the filter I use when a lease is 60-90 days from ending.

  1. Pull leased comps for that unit type on that street (or the closest ones), not zip-wide averages.

  2. Price a real turn: paint, flooring touch-up, appliances if they are near the end, cleaning, and the days of vacancy while it sits and shows.

  3. Add the soft costs: your time screening, showing, and onboarding, plus the risk that the next tenant is worse.

  4. Compare that total to what you would gain by raising rent for 12 months.

If the gap is small and the current tenant pays on time, communicates, and takes care of the place, I often renew at a modest bump or even flat. A $50 raise that triggers a move-out can cost more than a year of that raise once you include vacancy and turn.

When I do raise, I send the notice early, explain the comps in plain language, and leave room to negotiate if they are a strong tenant. I still underwrite the property at market rent for the next buyer or refinance, even if this year's lease is below that.

What do you use as the tipping point: a dollar amount, a percent of market, or the cost of a turn?

BJ Everson | Columbus investor and Realtor with Swiss Realty Group

1Reply
494 views

Most Popular Reply

Stacy RaskinBusiness Member
Lender · Member since 2022 · 1k+ posts · 530 votes
4d

I have seen tenants move over a small rental increase so I think an investor being realistic about their current local market as well as the time of the year there is a vacancy is important. Generally speaking, it's easier to rent a property in the summer compared to December.

Also, factoring in how good a tenant is as far as paying rent on time, following property rules and not annoying the neighbors is important as far as deciding on a possible rent increase. Usually good tenants paying market rent on their own with no outside program assistance, especially those who have strong financials such as strong income and credit, know they have other options- the tenants will potentially exercise them if they receive a rent increase and they think they can get a better or equal property for the same or less rent. Tenants have their own calculations they make. This will vary depending on the local market and how many options are available.

On the financing side, there are DSCR loan programs that will use the higher of the actual or the market rent on the appraisal to calculate the DSCR loan ratio of whether the rent covers the expenses. For 1-4 units, the expenses are generally considered the new monthly mortgage payment, the property taxes and insurance and the HOA if there is one.

I have seen properties sit vacant after rent increases and overall income reduced when a tenant moved out so an investor being strategic about rent increases is important. If and when to raise rent, depending on the tenant's track record at the property and market conditions can help with the investor's overall cash flow goals.

[email protected]818-770-0340
Bright Skyline517 Reviews
WebsiteView Page
2Reply
See this reply in the discussion

13 Replies

Jump to latestLatest
  • Ming Yi
    Investor · San Francisco · Member since 2026 · 60 posts · 28 votes
    4d

    I decide renewals with simple math, not feelings. Compare three numbers: the market rent today, what the tenant pays now, and what a turnover would cost you in vacancy, cleaning, repairs, and re-leasing time. If the market is up 3 percent and the tenant is good, I raise roughly that, and I frame it as keeping pace with the market rather than a penalty. If the tenant pays on time, reports issues early, and keeps the place decent, I would rather hold rent flat for a year than gamble on a vacancy that costs two months of rent to fill. A small increase that pushes a good tenant out is the most expensive raise you will ever give. Start the conversation 90 days before expiry so nobody feels rushed, and use the renewal to tidy the lease: update any terms that caused friction this year, confirm the rent due date and payment method, and get everything signed before the old lease ends. A renewal is also the cheapest moment to lock in another year of a known quantity.

    1Reply
    • BJ Everson
      OP
      Realtor · Columbus, Franklin County · Member since 2026 · 135 posts · 53 votes
      4d

      I like this approach!

      0Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 530 votes
    4d

    I have seen tenants move over a small rental increase so I think an investor being realistic about their current local market as well as the time of the year there is a vacancy is important. Generally speaking, it's easier to rent a property in the summer compared to December.

    Also, factoring in how good a tenant is as far as paying rent on time, following property rules and not annoying the neighbors is important as far as deciding on a possible rent increase. Usually good tenants paying market rent on their own with no outside program assistance, especially those who have strong financials such as strong income and credit, know they have other options- the tenants will potentially exercise them if they receive a rent increase and they think they can get a better or equal property for the same or less rent. Tenants have their own calculations they make. This will vary depending on the local market and how many options are available.

    On the financing side, there are DSCR loan programs that will use the higher of the actual or the market rent on the appraisal to calculate the DSCR loan ratio of whether the rent covers the expenses. For 1-4 units, the expenses are generally considered the new monthly mortgage payment, the property taxes and insurance and the HOA if there is one.

    I have seen properties sit vacant after rent increases and overall income reduced when a tenant moved out so an investor being strategic about rent increases is important. If and when to raise rent, depending on the tenant's track record at the property and market conditions can help with the investor's overall cash flow goals.

    [email protected]818-770-0340
    Bright Skyline517 Reviews
    WebsiteView Page
    2Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    4d

    Copy & paste:

    Proactive Renewals

    Our goal is to aggressively & proactively pursue lease renewals to lower tenant turnover, thus improving the investment return for our owner-clients, via less frequent Rent Ready Repair and Vacancy costs.

    Here’s a summary outline of how we pursue this goal.

    90 Days Prior to Lease Expiration

    • Lease Renewal Reminder auto-emailed to all tenants on lease, about 60-Day deadline to submit MoveOut Notice or the 12-month renewal @ 5% increase built into their standard LPM lease will automatically occur.

    • Annual Home Evaluation scheduled by our Inspections Department to determine:

      • Is tenant housekeeping acceptable, making them eligible for lease renewal?

      • If tenant chooses not to renew, is home in acceptable showing condition for marketing?

      • Video Timestamp and Scope of Work results shared with owner.

    • Market Analysis conducted by our Marketing Department to determine current market rent for home.

      • The analysis is shared with Owner & Tenant to establish rent increase parameters

    • Rent Negotiation message sent to tenant(s):
      “Your current Lease with monthly rent amount of $xxx will end on mm-dd-yyyy. Homes similar to yours are currently renting for $xxx. Please see the attachment that supports this rent amount. Given this higher rent amount, please let us know how much of an increase you think is fair.”

      • If market rent is NOT higher than standard 5% increase, alternative message sent.

    70 Days Prior to Lease Expiration

    • Lease Renewal Reminder again auto-emailed to all tenants on lease.

    • Rent Negotiation continues with 60-Day deadline in mind.

    60 Days Prior to Lease Expiration

      • Renewal Negotiation finalized by this deadline:

        • New Rent Amount is updated in our system.

      OR

        • Pre-MoveOut Process starts to prepare advertising for new tenant with showings the last 30 days of the lease.

        The standard LPM lease has an auto-renewal clause that requires either the tenant or landlord to give the other party a 60-Day notice for any changes to the lease, including termination. So, if both owner & tenant do nothing the LPM lease will auto-renew for another 12 months. The standard LPM lease also has a 5% auto-increase clause for each renewal period.

        The LPM lease legal structure does not require execution of a new lease upon auto-renewal. However, we do obtain confirmation from a tenant that they agree to the renewal & amount via portal, email, text or recorded phone call. To account for updates to the LPM standard lease, we do our best to have a tenant sign a new lease every two years.

        For tenants that want to only renew Month-to-Month (MTM), the standard LPM lease only allows this with a 10% increase and excludes the worst months to have a vacancy, November – February.

        [email protected]248-209-6824
        Logical Property Management4.9462 Reviews
        WebsiteView Page
        1Reply
        • Ryan SpathBusiness Member
          Real Estate Agent · Boise, ID · Member since 2017 · 602 posts · 385 votes
          4d

          • Rent Negotiation message sent to tenant(s):
            “Your current Lease with monthly rent amount of $xxx will end on mm-dd-yyyy. Homes similar to yours are currently renting for $xxx. Please see the attachment that supports this rent amount. Given this higher rent amount, please let us know how much of an increase you think is fair.”

            • If market rent is NOT higher than standard 5% increase, alternative message sent.

          So you either increase the rent 5% or let the tenant decide how much the rent should increase based on the surrounding rental comps you provide, this is very interesting. How much push back do you get on this? Also, with the 5% increase what is your typical acceptance vs move out. Do you track if the people move out is it due to the increase in rent or did the tenant outgrow the space, buy a home etc?

          [email protected]208-600-2814
          0Reply
        • BJ Everson
          OP
          Realtor · Columbus, Franklin County · Member since 2026 · 135 posts · 53 votes
          3d

          I like these adds!

          0Reply
        • BJ Everson
          OP
          Realtor · Columbus, Franklin County · Member since 2026 · 135 posts · 53 votes
          3d

          Great timing checklist! Gets you well prepared before the lock is ticking with a vacancy.

          0Reply
      • Matthew Tregoning
        Property Manager · Melbourne, FL · Member since 2019 · 561 posts · 194 votes
        4d

        I’d put an actual calendar behind that turn estimate too. Three days of work doesn’t mean three vacant days if the painter can’t start for a week and the cleaner comes after that. Before presenting renewal options to an owner, I’d check the local team’s availability and the order of the work. That makes the vacancy assumption a lot more useful.

        0Reply
      • Richard F.
        Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
        4d

        Happy tenants do not move often, my average turnover was approaching 5 years, with many tenants staying 10 years or longer. There were very few units, in very few years, that did not get some kind of increase...even if it was $10 or $20. Every renewal was handled the same however. Our rental agreements automatically revert from a year term to a month-to-month term without a written agreement, so we had some flexibility in choosing the actual timing, but we would always schedule a walk through inspection, taking photos and checking under sinks and all other accessible areas. Primarily I was always looking for any signs of water intrusion, pests (termites are a problem here), and general housekeeping.

        Once I completed a fairly brief inspection, I would interview the tenants to confirm that everything was operating properly or if there were any issues with neighbors etc.; I would ask their intentions...were they planning for another year, or do they have a target date to move due to job, school, growing family, etc.

        I would then take all of this information and evaluate the current market against the subject unit, and determine renewal options to offer the tenant. Usually that was a one year renewal at a stated increase in line with the market; an option for them to counteroffer the terms offered; and an option for them to sign a notice of vacating and provide the time frame for doing so if they were choosing not to renew. Of course, sometimes instead of a renewal notice, they would get a notice of Non-renewal, if there were issues of housekeeping, rule violations, or other factors. That notice might be 45 days (our local minimum) or more, depending on circumstances, but we would always pro-rate final month based on actual days of occupancy.

        0Reply
      • Mike FisherBusiness Member
        New Lenox, IL · Member since 2024 · 148 posts · 75 votes
        3d

        To your tipping point question, I use the cost of a turn, but I run it as odds instead of a yes or no.

        Say rent is $1,800. A turn here is often about six weeks empty plus make ready, so roughly $2,700 of lost rent and $1,800 of work, call it $4,500. A $75 raise is worth $900 a year. That means the raise only pays if it adds less than about a 1 in 5 chance that this tenant leaves. For a good tenant with few comparable options nearby, that is usually true, so they get a modest bump. For a tenant who is already shopping, or a lease that ends in winter, it usually is not, so the bump gets smaller or waits a year.

        Two things that move the odds in your favor:

        1. When a lease ends between November and February, offer a 13 or 15 month term. The next expiration lands in spring, when a vacancy fills faster.

        2. Fix the one thing they asked about this year before the renewal goes out. An open repair makes any increase feel bigger than it is.

        Mike, M Property Group LLC, south and southwest Chicago suburbs

        [email protected]
        M Property Group LLC | MF Cashflow Property Management4.997 Reviews
        WebsiteView Page
        0Reply
        • BJ Everson
          OP
          Realtor · Columbus, Franklin County · Member since 2026 · 135 posts · 53 votes
          2d

          Great adds!

          0Reply
        • Richard F.
          Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
          2d

          Dang! Six weeks for most turns? Why? What/how much work needs to be done typically? How long are they occupied between vacancies for these units? Can you post a link to a typical unit RTR?

          0Reply
        • Mike FisherBusiness Member
          New Lenox, IL · Member since 2024 · 148 posts · 75 votes
          2d

          Thanks BJ. Fair question, Richard. Six weeks is the calendar, not the work. Most of it is waiting: we usually cannot get in until the keys come back, then a week or two of make ready (paint, cleaning, flooring in spots, whatever the walk found), then listing, showings, screening, and a move in that tends to land on the first of a month. Winter stretches every one of those steps. The turns that finish in two or three weeks are the ones where we walked the unit before move out and had bids lined up before the tenant left. I keep owner unit details off the forum, but that is roughly how the timeline breaks down.

          [email protected]
          M Property Group LLC | MF Cashflow Property Management4.997 Reviews
          WebsiteView Page
          1Reply
      Join the conversationCreate a free account to reply, vote on answers and follow this thread.
      Log InJoin for Free