The Key To Lease Renewals (It's so simple!)
I was in a local hardware store looking for a piece of plumbing for my house when I started talking with a customer next to me. He was trying to repair his shower; however, he was not the owner or the property manager. He was the tenant and said that he had tried to fix the shower once before, but it had broken again. He knew that the landlord would not take care of the problem so he was trying to take care of the issue on his own. It broke my heart that here was this man on his own time and dollar trying to repair his own shower in a place that he rents because he knew the landlord would not take care of it.
Can we all just pause right here and agree that this is no way to treat your tenants? That tenants shouldn't be required to do their own plumbing repairs? Ok, good. So we are on the same page.
Being a successful property owner is dependent on your ability to make your tenants happy and take care of their needs. Sure you can get them in the door with flashy finishes or low rents. A decent neighborhood and some cosmetic upgrades go along way, but getting them to renew their lease is what will build consistent cash flow and keep your vacancy rates low.
The key to renewals is doing the right thing for your tenants. Don't be driven by financial analysis or personal greed, but instead be guided by your desire to do the right thing for your tenants. Let this be a guiding principle to your investing strategy.
I recently took over a lease when I purchased a duplex. The existing lease was below market rates and they had plans to move out after it expired in a couple of months. Shortly after closing on the property, the tenants contacted my property manager and reported that they needed pest control to address an ant problem. I had a choice to either say "sorry, too bad, you’re not making me enough money to warrant treating the ants" or could I do the right thing and treat the ants. Of course, I did the right thing and it cost me about $150 for two treatments. That property ran at a loss that month due to their low rent level, but it was the right thing to do.
This is just one small example of the dozens of times I have been faced with doing the cheap thing or the right thing. You too will face times when you have to make the same choice. Looking out for your tenants will help you build long-term tenant relationships who renew their leases even when the rent goes up. This approach will help you build wealth and consistent cash flow.