Strategies to Lower Vacancies and Keep Options Open
1. Keep the initial lease term to a year
If this is a new relationship, don’t lock into a multi-year agreement. Maybe after a terrific initial year you both decide to renew for another year or longer period of time — at that point, you have an established relationship. But until then, don’t get trapped into a longer term contract, even if it feels like a good idea at the time. Of course, if you need to have a shorter initial lease term, you can do that too, but that has the obvious drawbacks of vacancy and turnover etc. I’ve heard many a real estate attorney say that one of the biggest issues brought to their table is that a rental lease auto-renewed for an extended period of time without realizing it, and now one of the two parties is seemingly unhappy.
2. After the initial year, expires there are 3 good courses
After the initial year, then you can either:
- Choose to renew then for another set term
- Go month to month
- Or part ways
For the reasons listed above, I think month-to-month is the best option. Do not simply auto-renew the next term for the same as the initial term. To the attorney comment above, this is a major driver of confusion and attorney visits. After the initial term, you both know more about life circumstances, how the home is working out, and your relationship as lessor/lessee. If it makes sense to renew for an extended period of time and its mutually beneficial, there is little reason not to. The more popular route is to go month-to-month, with 2 important clauses: a set # of days to exit the contract, and a set # of days to adjust the rental amount. This way, the flexibility exists to cover both parties’ interests. Of course, if the relationship has not a great fit in the initial term, you kept your options open and can part ways amicably.
3. Require 60 days’ notice from your renters
You’ll be surprised at how this can impact vacancy rates. With this lead time, you will be able to plan for repairs and pre-marketing. If you’ve ever heard a landlord say they’ve held a property for ten years and it’s not been vacant a day, it’s highly likely that they kept the same renters the whole time, or they have a great notice period to help turn the rental asap. Most renters know sixty days out whether they want to renew or not, so its not really a hardship, you’re just putting more thought into the expectation here. Send them a note at the 90 and/or 75 day mark and politely ask their intentions so you’re all on the same page
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