Rent renewal at decreased rate?

Question

Hello,

I'm wondering if anyone has been in a situation where your current rent on a sfh is such that when you rented in last year (or prior year for those that experienced this a while ago) the rent was the average for similar homes, but currently (as the lease is coming up for renewal) the average has actually gone down. Did you offer a reduced rent to the tenant for renewal? Offer the same?

I would prefer to keep the tenant than to find new tenants so weighing what is the better option and what others have experienced.

Thank you in advance!

James

Rick Albert · Answer

I would just renew at the same rate if you have concerns. Let them bring up moving. If you offer a discount, they may ask for a bigger one. Not raising rent makes it look like you are a great landlord. Many expect a rent increase, not decrease.

Bruce Lynn · Answer

Common for tenants to ask for rate reduction, rare owners give it.

I suggest you do everything you can to keep the tenants if you can.  Lots of rentals on the market right now in DFW, so you don't want them moving.  1-2-3 months of vacancy, releasing fees, and make ready are very tough to make up, so best to keep your current tenants.

A couple of strategies you can try...

#1.  No immediate rent increase, maybe $25-$50-$100 six months from now.  Insurance and taxes seem to be going up and you want to cover those costs.

#2.  Add some kind of upgrade that benefits both of you.  More ceiling fans, new appliances, new flooring, mow their lawn this summer, new fencing, bathroom makeover.

Very tough for people to move.  Can't tell you how many have expressed interest in moving, but then when they check the market they understand they can't move.  I would say many owners getting tougher on background checks, so when they learn their new credit score, they understand they can't qualify at the new place.  If $50/month makes a difference, they can't pay a new deposit and next month's rent to really move to save $50/month.

Good luck and best wishes.

Bjorn Ahlblad · Answer

Sure we have done that on occasion, once or twice.

Mark Byers · Answer

My experience has been that this only occurs when a 'turn key' provider over-rents a property in order to sell it to an out of state investor. Generally goes sideways and then when it turns over rent has to come back down to actual market rate

Jay Thomas · Answer

In markets with rental rate fluctuations like Dallas, deciding whether to offer a rent reduction or maintain current rates for your single-family home (SFH) can be challenging. To tackle this, start by gathering data on average rents for similar SFHs in your area through local listings or realtor consultations. Then, weigh the options: sticking with the current rent ensures ongoing income but might risk tenant dissatisfaction, while offering a reduction can incentivize renewal and save on vacancy costs. Many landlords opt for modest rent decreases or propose multi-year leases with slight increases over the extended term to provide stability for both parties.

James Kim · Answer

@Nicholas L. so far so good so I'd prefer to keep them, but don't want to set a precedent decreasing rent unless there's a very good reason. Will be asking them if they want to renew first and offer the same rate and see where it goes. Thank you!

James Kim · Answer

@Bruce Lynn some very good thoughts, much appreciated. Never thought about upkeep during the tenant term but something I'll have to think about. Thank you.

James Kim · Answer

@Rick Albert thanks for the feedback. Decided to keep it flat for now see what the tenant decides.

Nicholas L. · Answer

If good tenant keep same

Khalid Bryan · Answer

@James Kim hi James, yes I have actually been in an apartment building where my personal rent went down slightly. I’ve also managed units where on our renewal rate we did reduce the rent from the prior year, but for other reasons, such as the prior year of the tenant having a washer and dryer, and a major plumbing issue with the building, preventing us from offering it the following year so we did a reduction. If I were you and I see the specific rental market is on a decline, I would simply ask the tenants, so would you like to renew? if they simply say yes, I would just say great. Let me send you over the lease and call it a day if they ask how much would the renewal be or if they specifically ask will the rate be going down because I see the market is going down then I would open that door for the communication and negotiation. If they simply just say something like my rent isn’t going up is it? I’d just say no.

￼ so long story short, I would go in with the plan to leave the rent the same but the willingness to reduce if they ask. The next part of this thought process is how are they as tenants if they are great tenants do what you have to do to keep them as long as it doesn’t affect your numbers and you don’t end up below market rents.￼ I have seen situations where landlords and tenants are both very firm on their requested rent price and it was a minimal difference and the landlord let them move out and the money it cost the landlord to clean fix paint and rent the unit out to a new tenant outweighed the difference they would have made the tenant after moving expenses and paying first class and Security again probably outweighed what they would’ve paid had they just stayed so sometimes it’s better to just negotiate and flex a little to renew a tenant than to keep swapping tenants.

Rent renewal at decreased rate?

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