As a property owner in Milwaukee, one of your main goals is to get lease renewals from your tenants.
A lease renewal is when your current tenant decides to live in your property for another lease term. This can be another month, to another 6 months, or an extension of another 12-month lease, depending on your leasing structure. Obtaining lease renewals is beneficial to both you and your tenant.
Lease renewals can be tricky, though. So, we created a guide for property owners for when they want to pursue a lease renewal and how to execute the new agreement.
What does it mean to renew a lease?
A lease renewal means that your tenants enjoy living in your property and renting from you, so much so, they want to continue. It also means you don’t have to look for a new tenant to fill your vacant property which can keep your property income consistent.
If the current lease automatically terminates after the term, you’ll have to write a new lease with a new period. If the lease automatically renews, then nothing more must be done. So, once the current lease ends, your tenant has leased the property for yet another term, usually a year.
While this is great news for most property owners (especially if the tenant is reliable), there are some disadvantages of lease renewals:
Limit on rent increases
When a tenant decides to renew their lease, this limits how much you can increase rent, if at all.
Many landlords will increase their rent price by a small percentage when trying to find a new tenant to keep up with the market. However, when renewing a lease with a current tenant, they will most likely expect you to keep the price.
Keeping rent the same for a returning tenant is a respectable thing to do as a property owner. Sometimes you can work out a $25 to $50 per month increase in the lease renewal agreement. But you should keep in mind that although you can’t raise the price of rent, you are guaranteed the same property income with a signed lease renewal.
No time for renovations
If you were hoping to do some renovations to your property to bring it more up-to-date, you wouldn’t be able to do so if your tenant decides to renew the lease.
While this isn’t a huge issue, it can be an inconvenience if the property owner has already started preparing for renovations to be made. If these are important renovations that need to be made for the quality of the property, then speak with your tenant about a schedule that may work to get these things done. Otherwise, renovations will just have to wait until the tenant moves out.
Could get stuck with a problematic tenant
There are great tenants, and there are some terrible ones, but there are also problematic tenants. Just because you had a good tenant during the first lease term doesn’t always mean it will be that way with subsequent leases, as they could still pose a problem at any point during the lease term.
Accepting a lease renewal could have you stuck with one of these problematic tenants. However, as the owner of the property, you can always deny the renewal of a lease to your current tenant if you feel it’s necessary. To learn more about the types of notices required when ending a lease, look up your state laws.
Steps to renewing a lease
There is a certain process that property managers must follow when they attempt to renew a lease with their tenants. By following these steps, you’ll have a smooth and likely problem-free lease renewal for your rental property.
Step 1: Approach your tenant
The first step to starting a lease renewal is to approach your tenant about renewing it. According to Wisconsin law, landlords must go to their tenants 15 to 30 days before the end of the lease to ask if they plan to renew it.
However, we recommend that you ask them sooner, at least 60 days before the end of the current lease. This gives them time to think about their decision and gives you time to start planning on finding a new tenant if necessary. You could also ask for recommendations or referrals for new tenants from your current tenants (if they are reliable).
This can also be a time to talk about things that are going well or not-so-well at your property. Even if you have an open line of communication as a property manager, your tenants might not bring up actual problems until you approach them. If your tenant has any questions or concerns, this would be a great time to go over them.
Step 2: Prepare the new lease
A new lease should be written if there are new agreements compared to the old lease. If the old lease automatically terminates at the end of the term, and there are no additions then just update the leasing dates and utilize the original document.
If there are new items to be mentioned in the lease, you’ll have to prepare a new document. The updated information will need to be accurately displayed, especially if the rental price changes or there are additional clauses. Always make sure to proofread before finalizing.
Step 3: Send and sign
Once you’ve finished writing the lease, it’s time to send it to your tenant to review and sign. This should be a fairly quick step, especially if the lease is pretty much identical to the old one.
Simply have your tenant sign the agreement, sign it yourself, and make a copy for your tenant to keep. Once that’s finished, you have successfully renewed a lease for your rental property.
Tips to encourage lease renewal
Since a steady tenant means consistent income, it should be a top goal for your rental property. Many property managers make the mistake of focusing on acquiring new tenants when retaining current ones is actually more cost-effective.
To encourage your current tenants to renew their lease, there are a couple of things you can do:
Offer an incentive
Make it appealing to your tenant to renew their lease with you. Offer them an incentive such as a discount on the rent or replacing an old appliance in the kitchen.
While it may set you back a few dollars, it will actually help you make a profit in the long run.
Increase amenities
Upgrading your property with amenities that tenants are looking for will make your property more attractive and could significantly reduce rental turnovers.
Of course, not every property or property owner has the capacity (whether that be space, time, or money) to add new amenities to their property, but it may be worth the hassle to figure out how to upgrade old amenities with newer features. For example, upgrading the laundry area with new washers and dryers or replacing old gym equipment with popular machines could make a difference in the appeal of your rental property.
Act professionally and friendly
Another way to encourage a lease renewal is to be an upstanding property manager to your tenants. This means acting friendly, attending to repairs and maintenance requests, and always giving notice before entering the property.
When tenants enjoy renting from you and respect the services and care you provide them, they will be more likely to renew their lease for another year with you. Otherwise, they may be more motivated to give you recommendations or referrals to other friends and family members too!
Get more lease renewals with Performance Asset Management
You can increase lease renewals for your rental properties in Milwaukee with a professional property management company.
Performance Asset Management is Milwaukee’s leading property management company. With an experienced and professional team, we make it easy for property owners to earn passive income from their real estate investments.
Thanks to modern technologies such as online owner and tenant portals, innovative marketing tactics, and experienced property managers, we will help you retain tenants year after year.
Contact us today and see how we can help you increase your rental income and get more lease renewals.
