Managing the managers – lease renewals & rates

[Jason A.]

Hi all,

Wanted to share an experience I had with one of my property managers this week and would appreciate your feedback.

I am newer to the game – having purchased four SFRs all in the last 10 months. I have a lease expiring in May and as such, I’d emailed property mgmt. to touch base and understand their sense of the local market (i.e. are we at market rents, under, etc.)

I was surprised to hear back that they had already contacted my tenant and offered another 12 month lease at the same rate. In their view, while the market is not soft, it has largely traded sideways – hence offering the same rent rate.

Thoughts / Questions:

• (1)My thought is to raise rents even by approx 1% ($10-$15 per month). Tenants aren’t going to make renewal decisions over a de minimis increase. While c. $12 is nothing, if I take this approach across all four properties (on the basis we were in a “sideways” market for each), it adds up at the end of the year and becomes incremental to overall free cash flow. Do you all agree with my thought process – how can I think about this differently?
• (2)For those of you with property managers (my properties are out of state) is the renewal rate something you’d want to be involved in / discuss in advance before mgmt. goes out to tenant? I’ve now asked each manager to ensure they contact me beforehand going forward.

Thanks very much 

[Brandon Battle]

You are the landlord,not them!! If that new lease hasn't been signed yet,order it recinded immediately.Send out a new lease agreement with at least $25.00 per month increase.Big enough to matter but not enough to chase them away.If it is too late,fire the property manager for not contacting you about sending out the new lease without your permission.Every lease renewal gets a rent increase of at least 2 to 3% every year minimum.As long as you are a good landlord and maintaining the property and there are no unanswered complaints from the tenants,they will stay and accept the modest increases.if not,get better tenants who will.