Why are renters leaving your units? What can you do about it? Tenants are on the move. What are the most common reasons they may leave your rentals? How can landlords prevent these moves to keep good tenants, maintain consistent cash flow, and maximize cash flow?
The 5 Most Common Reasons Tenants Leave Your Rentals
1. They want to move somewhere cheaper.
Housing costs, especially rents, have been rising for the last five years. Some are just at the point where it makes sense to move somewhere cheaper where renters can get a lot more for their money. It could be that local rents have just gotten too high—or maybe your rents in particular are too high.
Market rents change over time. Be sure you stay tuned into local trends, even when you aren’t actively looking for tenants. If neighboring properties are leasing for 30% less than yours, that could become an issue. Price your properties right. Invest in stable and upcoming locations with more room for growth.
New York renters would be the first to tell you that rents go in only one direction: up. But after a long and relentless climb to historic highs, the momentum has stalled.
With renters unwilling, or unable, to pay ever higher sums, rents have largely flatlined. And it seems we have come to the year of the renter’s market.
In Manhattan, Brooklyn and Queens, inventories and vacancies are up, and landlords are offering new tenants discounts, like several months of free rent and no broker’s fee. In the Bronx and Staten Island, rents are holding steady because those boroughs did not experience the same rapid rent escalations or volume of new development. But that could change when new rental buildings open in both boroughs this year and in 2018.
The biggest deals are happening at the top of the market, where some luxury developments are offering as much as four months of free rent on a two-year lease. But deals are to be had in older, less expensive buildings, too. Despite these concessions, some apartments linger vacant for months. Worried that a slowdown will continue, many landlords are not raising the rent when leases come up for renewal, and some are even throwing in perks like gift cards.
Many landlords and real estate brokers attribute the renter-friendly trend to an influx of new apartments: 11,514 new rental units came on the market in Manhattan and Brooklyn in 2016, and 13,340 are expected this year, according to Citi Habitats, a real estate brokerage. The large number of condominium apartments that investors have turned into rentals has added to the glut. These apartments are mostly luxury rentals, and too expensive for many New Yorkers. So tenants with smaller budgets are fanning out to neighborhoods like Crown Heights, Brooklyn, and Jersey City.
As landlords, we want some amount of tenant stability; after all, tenant turnover is a cashflow killer. Very rarely will we sign a lease for a term of less than one year or allow tenants to break a lease without a very good reason. We just want the general comfort of knowing that we likely will not have to worry about that particular unit for at least a year.
Sometimes, however, tenants want to break their lease. By “break” I mean move out before the lease term is expired. The reasons for this are often quite varied and range from “I just don’t like it here anymore” to “I lost my job.” With the first example, we have to get our tenants to face the hard reality of the lease by explaining to them again that they have signed a contract which we expect them to uphold. We make them understand we really cannot force them to stay, but that there will be penalties if they do not get the OK from us to break their lease.
The second example, however, is a different matter. There are times when we will let a tenant out of their lease, and job loss is one of those potential reasons. I explain why below and also provide you with four other reasons we allow a tenant to break their lease. The 5 Legitimate Reasons to Allow a Tenant to Break Their Lease are
When to raise rent is a question many landlords ask themselves. Sometimes it comes up when a tenant leaves. Other times it comes up when a landlord gets an increase in taxes or insurance. Rents have been increasing and it is a great time to be a landlord. In fact, landlords have been enjoying some of the fastest growth in rental rates in recent history. But you want to be aware there is a cap to that growth and we have begun to see this in some markets already.Rental demand has continued to remain very strong, which allows landlords to be bullish on rental rates.
Although your tenants might believe that you should respond to all of their concerns immediately, it is not always required that you do. However, you should acknowledge their issues, and let them know that they will be addressed as soon as you or a member of your maintenance team is available. This is important because if you do assure them that someone will be out as soon as possible, you may just see them living on your property for a lot longer!