6 Reasons Good Tenants Don’t Renew Their Leases

by | BiggerPockets.com

If you’ve been a landlord for long enough, you’ve inevitably had an experience where you have a good tenant — things seem to be going fine — and then they surprise you by not renewing their lease. Aside from being costly, these situations are confusing. What makes these tenants leave?

6 Reasons Tenants Move on

Tenants fail to renew their leases for a number of reasons, but some are more common than others. Let’s discuss a few of these reasons:

1. Changes in Personal Situation

In many cases, a tenant’s personal situation may simply change. Maybe they’ve changed jobs, recently expanded their family, or are moving away to be close to a significant other. There’s nothing you can do about these highly personal situations, which often sneak up with very little warning.

2. An Expensive Rent Hike

Are you enacting an increase in rent? Even if it’s simply to keep up with the going rate, many tenants don’t like the idea of increasing a rent payment for the same property. For some reason, they’d rather switch properties and pay more. Psychologically, a new place seems to better justify the price increase.

If you absolutely have to raise rent, do so over time. Raising your rent by more than 10 percent is a surefire way to lose even your most loyal renters. If your rent is significantly below market value, tell your tenants. Then, gradually raise rent in increments each year. Raising rent 2–3 percent here and there will have a much less noticeable effect.

Related: 4 Tips for Finding World-Class Tenants for Your Rental

3. Poor Attention to Detail

Sometimes tenants simply get tired of dealing with your lack of attentiveness. While they understand that issues happen, they want to see you put forth the proper effort to correct them. For example, if the air conditioning goes out on a Friday afternoon in July, they want you to make as many calls as you can to get someone out there right away. Waiting until Monday and forcing them to suffer through the miserable heat won’t win you any bonus points.

4. Lack of Communication

This one goes hand-in-hand with the last point; lack of communication is a major cause for turnover. Not only do you have to communicate regularly with your tenants about things like maintenance, but you also need to speak with them about renewal well in advance to give them time to process things like rate increases or changes in lease terms.

5. Lack of Trust

What have you done to establish trust and rapport with your tenants? Do they feel like they can be upfront and honest with you? — Or do they sense that your only purpose is making money? Tenants want to be treated with transparency.

Related: 7 Ways to Be Landlord of the Year (& Retain Your Best Tenants!)

6. Problems With Neighbors

As we all know, bad neighbors can make for a miserable housing experience. Nobody wants loud, intrusive neighbors. If you have bad neighbors around, don’t be surprised when your tenants take a hike.

The Cost of Turnover

Experienced real estate investor Kevin Perk knows a thing or two about managing properties, so when he says that tenant turnover is the single biggest killer of cash flow, your ears ought to perk up.

“When talking about tenant turnover killing cash flow, I am talking about all of the processes and costs involved in moving a tenant out of an apartment, fixing it up, and moving another tenant in,” Perk says. These include administrative costs, advertising, showing the property, application costs, repair expenses, and, of course, lost income.

While you can’t retain 100 percent of your tenants, you can make sure you’re aware of the common causes of turnover so that you don’t do yourself a disservice.

What do you do to keep your tenants happy? Let me know in the comments section below!

About Author

Larry Alton

Larry Alton is a professional blogger, writer and researcher who contributes to online media outlets and news sources. A graduate of Des Moines University, he still lives in Iowa as a full-time freelance writer and avid news hound. In addition to journalism, technical writing and in-depth research, he’s also active in his community and spends weekends volunteering with a local non-profit literacy organization and rock climbing.

10 Comments

  1. Erik Whiting

    Good thoughts overall. Attention to detail and communication are the two areas where I see a lot of my competition fall short.

    Have to disagree on not raising ASAP to market rent though. If your market rent is going up by 10% a year…raising only 2-3% just ensures you are losing a lot of money. Turnovers aren’t that expensive or time consuming if managed properly. In a hot market (can we all agree 10% market rent increases define a HOT market?), you simply must increase rates. Otherwise, you’re losing ground faster than gaining. And goodness knows what happens if you’re in an area that enacts rent control when you’re still 10-15% under market. Now you’re FORCED to take lower than market increases. Rent control is rare, but still a risk in hot markets.

    For most of us…let’s say we have a “warm” market going up 6% per year. At the end of year 1, you raise it 3% to keep your “good tenant”. Do that 2 more times and you’re 9% behind the curve, which is the same as losing an entire month’s rent. In a warm market you should be turning over in less than 1-2 weeks. Most of my vacancies are filled before the prior lease expires.

    Know the value of your units and market like a mad man. Don’t leave money lying on the table. I think some land lords are too timid when it comes to raising their rents and that’s how over 10 years they end up 20-30% or more below market.

  2. Chad Hale

    Agreed sometimes poor management is the reason for tenants moving on. Those things can/should be fixed.

    If you are selecting good tenants and they are financially responsible, they will likely be moving on at some point to purchase their own home. Just received notice last week from a tenant with precisely this reason…

  3. I agree with John Rives as a MD and DC licensed Realtor that many tenants leave to have their own homes, and their own privacy. Depending on the situation, if the tenants don’t feel that they have enough privacy, and freedom to do what they want, when and how they want, they’ll bail the first chance they get. There is nothing wrong with this, and it’s not something you can control. You can’t force anybody to stay in your rental property if they don’t want to, regardless of the reason. If they fulfill the contractual agreement of their lease, legally they don’t need a reason. I don’t see a little tenant turnover as a killer of cash flow at all. Big condo associations, and apartment complexes deal with this on the regular. Granted I will say it does create more work, time, energy, and effort on the landlord, and property managers part; but that’s about it. Unless the turnover is extremely high, and u constantly have people moving out, and nobody ever wants to sign more than a year lease with you, it shouldn’t be an issue. I believe one thing to do is to have a database of “leads” much like us realtors do to work with. That will definitely help in a down market, and/or if your turnover rate is higher than you would like. Overall, great blog post.

  4. Laurel Devine

    I have been a landlord since 1983 and the last year, when a tenant (any tenant good or bad) says they are moving, I jump for joy. Rents are going up at a break-speed rate here in NJ. Every time a tenant moves out I raise the rent between $250 and $450 per month.

  5. Christy Browning

    Thanks for posting, you have great points. On the communication end, my tenants recently pointed out that they would appreciate the ability to pay rent online. I have enrolled in Cozy’s rent payment system, no charge, and will see how it works starting next month. They appreciated my quick response and openness to trying something new they suggested.

    • Billie Miller

      We require automatic payment of rent through erentpayment.com. It’s actually a good screening question too. If an applicant balks at having rent automatically withdrawn that could be a red flag! If a tenant prefers automatic withdrawal, that probably means they will consistently have money for rent.

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