When you have a great tenant living in your property in Phoenix, you want to do everything in your power to hold on to them. One way to do this is by offering a lease renewal to encourage your tenant to stay in your rental property for another year.
Not only does offering a lease renewal keep great tenants in your properties, but it also saves you money. You don’t have to market your property or risk having a vacancy and losing rent.
How do you go about getting your tenant to renew their lease? What laws or regulations must you follow? By the end of this article, you will know everything about lease renewals and how to get even more of them in Phoenix.
Lease Renewals in Phoenix
As you’re probably aware, each state has different laws about rental properties. When it comes to leases in Arizona, they automatically renew if the landlord or tenant has not given written notice ending the lease 90 days before it ends.
While this may seem convenient and easy for most landlords, there are some struggles with automatic renewal.
The first issue is that the automatic renewal means the same terms are in place, including the rental price. So, if you wanted to increase the rent in the renewal, you would have to end the current agreement and sign a new one.
The second issue is that you could be stuck with a bad tenant if neither party ends the lease agreement.
Although you are happy with the terms you and your tenant have agreed upon in the first lease, you may let the lease automatically renew without a problem.
When to Ask Your Tenant About a Lease Renewal
Since Arizona’s laws require at least 90 days’ written notice to end a lease, you should ask your tenant if they would like to renew their lease at least three months before the current one ends.
Not only does this comply with the state’s laws, but it also gives you time to find a new tenant if the current one decides to end the lease.
When asking your tenant if they would like to renew their lease, make sure it is in written form. This can be a text, letter, or email. Make sure to state when the current lease ends and any new proposed terms for the new lease.
Offer Incentives for Renewals
One way to encourage your tenant to renew their lease is to offer incentives. This could be a discount on the monthly rent, a discount on the first month, or even an added renovation or upgrade to the property.
This is up to you to decide what you would like to offer your renter. It’s important to weigh the costs and benefits when providing incentives. You don’t want to severely damage your rental profits just to keep a tenant.
Maybe you don’t want to offer an incentive, but your tenant does have some requests in order to renew the lease.
For example, they may want their bathroom to be renovated and made more modern. To negotiate, you could raise the rent by $25 per month in the renewal to have this done.
Or maybe you want to remain competitive and increase the rent in the new lease. Only raise it a minimal amount, maybe $50 per month. If your tenant asks why, you can show them proof that you are keeping up with the current rental market.
Benefits of Getting a Lease Renewal
Why would you want your tenant to renew their lease? There are many reasons!
The first reason is that you don’t have to spend time or money acquiring a new tenant. Think about the marketing and repair costs you’ll have to pay to find a new tenant. Plus, you’ll have to spend your time showing the property. So, it actually saves you money to retain a tenant.
The second reason you should push for lease renewals is to keep good tenants. It isn’t easy to find a tenant who pays rent on time and doesn’t cause many issues. This is a landlord’s dream come true!
The third reason is that you don’t have to worry about having a vacant property. Depending on the time of year, rental market, and other factors, you could find yourself losing money on rent with a vacant property nobody wants to lease. With a lease renewal, it will be filled and generating rental income no matter what.
Steps to Get Your Tenant to Renew Their Lease
There’s a three-step process you should follow when renewing a lease for your tenants in Phoenix.
1. Propose a Renewal
Ask your tenant if they would like to renew their lease at least 90 days before the end of the current one. This should be in written form, either an email or letter stating the start of the new lease and any changes.
2. Draft a New Lease
If there are changes to the lease and you don’t want the current one to automatically renew, draft a new one. This should include the new term dates and any changes to rent price, utilities, and other agreements.
3. Send and Sign
Once the draft is finished, send it to your tenant to sign. This can be done either in person, electronically, or have them print, sign, and scan it back to you.
We do recommend using a digital signature service for prompt and convenient lease renewals.
Reasons a Tenant May Not Renew
There are some instances where your tenant may not want to renew their lease. These include factors such as:
- Moving to another area due to work
- Lifestyle changes such as divorce, marriage, or a new addition to the family
- Wanting to live in a different area
- Looking for a bigger or smaller home
- Moving closer to their workplace
- Looking for different amenities or features
While these reasons are out of your control, you can always try your best to get current tenants to stay. By acting in a professional manner, being friendly, and making repairs promptly, you can encourage tenants to renew their lease.
Get More Lease Renewals with a Property Management Company
In 2018, the rate of lease renewals jumped to 52%, which is promising for landlords in the United States. There’s a surefire way you can increase your renewals in Phoenix – hire a property management company.
Real Property Management is Phoenix’s leading property management company. Managing over 500 units, our experienced team handles everything from acquiring tenants to answering maintenance requests to guaranteeing quality tenants for at least one year.
When tenants rent from us, they can expect all around professionalism, prompt communication, and quality service. It’s these qualities that will increase your lease renewals (and your rental profits) in Phoenix.
Contact us today to see how we can help you boost tenant retention, get more lease renewals and put more money in your pocket!