Rental properties are an excellent way for property owners and real estate investors to maintain a consistent stream of income. However, frequent tenant turnovers can torpedo rental profits and leave properties vacant for long periods of time between leases. For real estate investors, effective rental management that encourages renewals will help ensure consistent cash flow and minimize the losses incurred during periods of turnover.
In this article, we’ll share some of the top reasons tenants choose not to renew their lease, as well as tips on how rental property owners can encourage long-term tenants who renew their leases every year.
Rental management turnovers can be triggered by either the landlord or the tenant. However, when landlords initiate rental turnovers, they have more time to prepare the unit and market the listing before it becomes vacant — minimizing the chance of missed rental income and potentially providing an opportunity to charge higher rent for the next tenant. Renter-initiated turnover, on the other hand, can leave landlords with an empty unit for months before they find the next tenant. Here are three common reasons why tenants leave their rentals.
A major reason renters choose to look for alternative housing instead of renewing their lease is when landlords fail to follow through on promises they make at the beginning of the lease. These may include the use of a parking space, access to the basement for storage, or the ability for tenants to sublet their unit. When a renter and landlord enter a rental agreement, each party signs a lease that reflects their roles, responsibilities, and privileges. When rental management owners do not keep up their end of the bargain, tenants become frustrated and are more likely to seek alternative housing.
While rental property owners spend significant time and money in their rental management, this investment is often directed toward capital improvements such as large-scale renovations and facility improvements. Landlords typically make these improvements during vacancies so they don’t disrupt current tenants and can charge higher rent for the next tenants. But when current tenants ask for maintenance and repairs, research shows their requests can go ignored.
A recent Harvard study found that over the past decade, landlords’ investments in capital improvements have far exceeded basic maintenance. This can create significant tension between landlords and tenants. This is exacerbated when tenants are forced to put in repeated maintenance requests for essential items such as temperature control units, kitchen appliances, non-functioning lights, and more.
To ensure they collect rent on time each month, landlords are incentivized to make the rent payment process as easy as possible. Collecting rent online and accepting multiple payment methods encourage tenants to pay their rent on time, reduce the likelihood of miscommunication, and can simplify rental management across multiple properties for landlords.
Conversely, cumbersome and inconvenient rent payment processes such as paying in cash or mailing paper checks discourage tenants from continuing to rent from landlords who don’t allow them to pay rent the way they want to.
A recent survey found that approximately 40% of U.S. renters pay their rent late, which can happen for a variety of reasons. Landlords can eliminate some of the challenges that renters face by aligning rent payment processes with the preferences of their tenants. This means that landlords who own multiple rental properties might have to account for different preferences — from credit card payments to ACH bank transfers. But keeping rental management finances organized can be challenging for landlords who own multiple properties.
Landlords can simplify rent payment processes for their tenants and consolidate rent management across all their properties by using Azibo’s free rent collection platform. Azibo allows renters to choose from flexible online payment methods — including credit card, debit card, or bank transfer — and view a history of their rent payments. Landlords can use Azibo to track their tenants’ payment status in a simple rent dashboard, and will receive payouts in three business days — faster than most rent collection platforms.
The best way landlords can encourage their tenants to renew their lease is to make sure their stay in that property is a pleasant one. Landlords must be proactive in identifying and solving issues that a renter is likely to encounter, and respond quickly when unexpected maintenance issues arise.
Landlords should ensure that the property remains well maintained throughout the entire lease with minimal or no prompting from the tenant. That may include replacing HVAC filters, testing smoke and carbon monoxide detectors, managing pests, cleaning gutters, and encouraging tenants to report leaks immediately. This demonstrates to tenants that the landlord cares about their experience and will take care of any problems during their extended lease period. Even if a tenant chooses to leave the unit for other reasons, this positive experience can help landlords build a good reputation that can be shared with other potential renters who are looking to rent the property.
The rental property itself is often not the only factor that tenants evaluate when deciding whether they should renew their lease. Their relationship with the landlord also plays an important role in ensuring a positive, long-term rental experience. Landlords and tenants should always ensure that expectations are clear and documented at the beginning of the tenancy to prevent any tension from arising in the future.
The documents that outline rental management roles and responsibilities should remain accessible to both parties throughout the lease period. This minimizes ambiguity and lays a strong foundation for effective communication and relationship-building.
Rental property owners who wish to generate consistent cash flow and high profits should always be aware of the impact that tenant turnovers have on their business. Lease renewals represent an easy way to minimize the effect turnovers have on rental management. They are also an excellent indicator of a landlord’s ability to provide stellar renter experiences and keep renters satisfied over long lease periods. By responding to maintenance requests quickly, setting up simple rent payment processes, and ensuring clear communication, landlords can encourage lease renewals and enjoy reliable, long-term tenants.
If you would like to use technology to improve the rental management experience, sign up for Azibo’s free platform.