When a lease ends you have the option to renew or not to renew the rental agreement. It’s ideal to keep a good tenant, but if you’re not crazy about the one you have, you might want to consider parting ways. Here are the pros and cons you should think about if you’re considering ending the lease with your current renters.
Benefits of Renewing a Lease Agreement
1. Keep Good Tenants
If you have a good tenant who pays the rent on time and treats your property with respect, by all means, renew their lease. Finding a responsible occupant who follows the rules and takes good care of the unit isn’t always easy to do. When a good renter wants to renew their lease, most landlords will jump at the opportunity.
2. Save Time and Money
Finding a new tenant can be time-consuming and costly. By renewing a lease with your current renter, you can save yourself a lot of time and aggravation.
You won’t have to spend the time and money showing the apartment, doing background checks, and running credit checks. You won’t have to spend money advertising your apartment or listing your property online. And you won’t have to worry about the unit being vacant for an extended period of time.
Renewing a current lease also saves you from having to explain the rules and lease to a new person. Current occupants already know what’s expected of them, so it will be business as usual. That continuity will make life easier for everyone involved.
3. Build Better Relationships With Current Tenants
The longer you have a tenant in your unit, the easier it will be to establish a good rapport. And having a good relationship with a tenant can lead to referrals. If and when they do decide to move out, they may be able to refer you to other friends or coworkers who would like to rent your apartment.
Cons of Renewing a Lease Agreement
1. Could Encourage a Bad Tenant to Stick Around
The last thing you want to do is renew a lease agreement with a tenant that you don’t want to keep. If they pay the rent late or have caused trouble on the property, it might be best to spend the time and money finding a new occupant instead.
Before you decide to renew a lease, do an annual rental property inspection. Look for signs of damage, including smoke damage, water damage, and pet damage. If you see any signs of any kind of damage that they have caused, renewing their lease is not a good idea.
If you suspect that there is any form of illegal activity on the property, do not allow your tenants to renew their lease. There’s no reason to settle for renters who can’t follow the law.
In terms of paying rent, if they have been late once or twice you can probably let that slide. But if they consistently make late payments, it could be a sign that there is significant financial trouble. And there’s nothing worse than having to evict someone for not paying the rent.
2. Restrictions on Raising Rent
Do you think your rental property is worth more than you’re currently charging? If you want to raise the rent, you may have to end the lease with your current tenants.
In some jurisdictions, local laws restrict how much a landlord can increase the rent on current tenants. These laws exist in order to protect tenants. But if you’re looking to increase your revenue, they don’t necessarily have landlords’ best interests in mind.
If you wish to raise your rent, you probably should not renew the lease with your current occupant. Instead, you may need to find a new person and charge them the higher increased rate.
3. Delay Renovations
Ready to hang new kitchen cabinets? Thinking about installing new hardwood floors? Hoping to put new tile in the bath? If you want to do renovations, it’s best to do them when the unit is empty. Doing small upgrades while a person is living in the unit is usually okay, but major renovations are easier to do when the unit is empty.
If you can’t wait to get started on renovating your property, don’t renew your tenant’s lease. By renewing you’ll have to delay your renovations. You won’t have the opportunity to make significant changes, at least for the duration of the new lease.
Should You Renew?
There are both pros and cons to renewing a lease with a current tenant, so you have to think it through before you make any snap decisions. Just make sure you decide within a reasonable time frame. Your tenants deserve the chance to find a new place to live or relax knowing that they’ll be staying put for another year or so.
Renew a lease if you have good people living in the unit. If they pay on time and haven’t caused any damage, keeping them in the unit is better than having to spend the time and money it takes to find someone new. Plus, the longer you have someone in your unit, the easier it is to build a strong relationship, which can lead to referrals down the road.
Do not renew a lease if you have bad tenants. If they pay late, do any sort of illegal activity, or have caused property damage, let them go when the lease is up. If you’re hoping to raise the rent or do major renovations, you might even want to let a good renter go.
Weigh your options and weigh the pros and cons of keeping the occupants you have or looking for new ones. Every situation is different, so take the time to think things through before you decide.