It is common for us to see investors managing their own properties to have an initial one year lease term with a tenant and then continue with a month-to-month agreement versus renewing the lease. While the month-to-month agreement may be a preferred method should the investor plan to liquidate or exchange their holdings in the near term, we believe it is preferable to renew leases upon expiration for another year, possibly more, in cases where you would like to retain the existing tenant. The retention of a quality tenant will eliminate costs such as tenant placement, lost rent and maintenance needed to rent the property to a new tenant.
With a lease renewal, there is additional control over the end date of the lease term. It is preferable not to have a tenant move out during a slower time of year, such as the holiday season. The time to turn a property over is extended when marketing conditions are weaker which results in costly vacancy to the investor. Lease renewals will typically vary from property to property. For example, rent increases probably won’t be the same amount for every property as market conditions vary between areas within the same general area. If maintenance will be needed should a tenant move out, such as painting or carpeting, it would be more favorable to an investor in most cases to keep the property rented, even for the same amount or, possibly, a smaller than normal rent increase.
Most investors prefer that reliable tenants are in place, taking care of the home and paying the rent on time. A lease renewal helps ensure that your property is set to be occupied for the lease term with predictable rental income. The primary goal is to keep you property occupied, reduce turnover and other unnecessary expenses.