Lease Renewals vs. Turnover: Why Keeping Good Tenants Pays

A good tenant who renews is often worth more to you than a new tenant paying higher rent. That surprises a lot of owners, because the instinct when a lease comes up is to push rent to market and see what happens.

But rent is only one side of the ledger. Every time a tenant moves out, a string of costs kicks in: empty months, cleaning, repairs, marketing, and the time it takes to find and approve the next person. Those costs add up fast, and they often wipe out a year or more of the extra rent you were hoping to gain.

Here's how to think about renewals versus turnover, and how Candlewood helps you make the right call for each property.

The real cost of turnover

When a tenant leaves, the bill rarely shows up as one line item. It's spread across several categories, which is why it's easy to underestimate.

• Vacancy. This is almost always the biggest cost. Even a well-marketed unit typically sits empty for a few weeks between move-out, make-ready, and move-in. Every one of those days is rent you don't get back.
• Cleaning. Even tidy tenants leave behind work. A full turnover clean is a standard step before the next showing.
• Paint and repairs. Walls get touched up or repainted, carpets get cleaned or replaced, and small wear items get fixed. The longer someone lived there, the more there usually is to do.
• Marketing and leasing. Photos, listings, showings, application processing, screening, and lease preparation all take time and money.
• Utilities and upkeep while vacant. Heat, electric, lawn care, and snow removal don't stop when the rent does. In a Wisconsin winter, a vacant unit still needs to be heated and checked.
• Risk with a new tenant. Even with careful screening, a new tenant is an unknown. A renewing tenant has a track record you can see.

Running the numbers

In this example, renewing comes out about $1,580 ahead in the first year, even though turnover brings in a higher rent. The numbers below are illustrative for a unit renting at $1,200 a month. Your property's figures will differ, but the pattern holds for most rentals.

• Option A: Renew the current tenant with a modest 3% increase to $1,236.
• Option B: Let the tenant go and re-rent at $1,300, with one month vacant.

The higher rent from the new tenant is only $64 a month more than the renewal. At that pace, it takes about two years just to earn back the cost of the turnover, and that assumes the new tenant stays that long and the vacancy lasts only one month. A longer vacancy, a bigger repair, or a leasing fee pushes the break-even point out even further.

How Candlewood approaches renewals

We treat renewals as one of the most important things we do for owners, not an afterthought when a lease is about to expire.

• We start early. Our team begins the renewal process well before the lease end date, so there's time to plan and no scramble at the last minute.
• We look at the whole tenant, not just the rent. On-time payment history, how the unit has been cared for, and how easy the tenant has been to work with all factor into our recommendation.
• We price renewals thoughtfully. We compare current rent to the local market and recommend an increase that keeps your income growing without pushing a great tenant out the door.
• We stay on top of maintenance. Tenants who get timely repairs and respectful service are far more likely to stay. Quick, professional maintenance is one of the best retention tools there is.
• We keep you in the loop. You'll get our recommendation and the reasoning behind it, and you make the final call.

When turnover is the right call

Renewing isn't always the answer. Sometimes letting a lease end is the better business decision.

• Rent is far below market. If a long-term tenant is paying well under what the unit would earn, and a reasonable increase won't close the gap, a reset may pay off over time.
• Late payments or lease violations. A tenant who regularly pays late or doesn't follow the lease costs you in time, stress, and risk.
• The property needs major work. If you're planning a renovation, a vacancy may be the best window to do it.
• You're selling or changing plans. A lease end can give you flexibility for a sale or a change in how you use the property.

In these cases, we'll walk you through the tradeoffs and help you plan the transition so the unit gets back on the market quickly.

The bottom line

A steady, reliable tenant is one of the most valuable assets your property has. Keeping them in place with a fair renewal usually means more money, less wear, and fewer headaches than chasing the highest possible rent.

Have a lease coming up for renewal, or questions about where your rent stands compared to the market? Reach out to the Candlewood team or visit rentcandlewood.com. We'll help you decide what makes the most sense for your property.