Tennant re negotiating rent at lease renewal

[William Peterson]

Background: Good tenant, pay on time. Property was in good shape when I inspected. Tenant asked for rate reduction. Area rent rates are flat to very slightly down from last year when they signed. Tenant is asking for around 45 (4%) dollars off per month(and signing a 18 month lease vs 12). Having them move out will cost me around 2,000, maybe slightly more. Out of principle I want to keep the rate the same or raise it however I know financially it makes sense to keep them in the place if they are not bluffing. Any advice? Thanks

[Mike H.]

if the lease expires between now and next 3 month, you may be expecting a slower listing on the market.  $45X18 = $810 loss from you to keep them for another 18 month. 

2 actions I would do if I were in your position.

1) Check the rental history of the area in the past 1 year period to understand the rent difference between summer and winter and days on market for a full evaluation of this Market you are about to face.

2) What would be a reasonable rent in the market today? will this $45 deduction hurt you much in cash flow?

3) I would take this opportunity to REdesign the lease and expire the lease in summer time when rental rates are at its peak instead repeating again (12-month lease) in winter time to allow tenants play this game on you in their advance.

After reviewing these, you should have a good idea about the lines and should help you find a direction.

I would keep tenants if they are good and takes care property well.  That's something you can't buy w/ $45 dollars.