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The pandemic has certainly changed the landscape of the rental market. In 2020, the rent in Chicago went up by an average of 4.4%.
From 2017 to 2019, the rental escalation was just 3.6% nationally.
So, with that in mind, you may want to negotiate a new lease with your renters. But, how do you go about negotiating a lease renewal?
These are three crucial things to keep in mind during that process.
1. Know the Market
The first thing that you need to keep in mind is what your local market looks like. As stated above, the average rent in Chicago has gone up by 4%, but not everybody may know that.
So, let's say that you, the landlord are operating under the old assumption of rent going up by about 2% every year. Then, let's say you are negotiating on an old deal of $2,000 rent per month.
With this scenario, you may be costing yourself $500 extra in rent per year because you can increase that rent by $80 per month instead of just $40 per month if you know what the current market is demanding.
Do your research on what the average rent is in your area for the type of apartment that you are offering before you start negotiating the lease renewal.
2. Know Your Vacancy Rate
Another thing to keep in mind is how many rooms you have available in your building over the future months. This really applies to property managers or building managers rather than those who are renting out a single home.
But, the number of rooms that you need to fill could come into play when you are doing a lease renewal negotiation because if there are more left, you could take a little less money to keep a room filled for a year.
In 2021, the national average vacancy rate is 5.8% compared to it being nearly double in 2009 at 11%. So, if you have a higher vacancy rate in these times, then you might have to be a little more flexible with leases.
If you need to fill the room, consider offering a discount for a longer lease.
3. Beneficial Flexibility
Sometimes, being flexible on the lease can benefit you because it can give you something that you were not expecting. For example, if a renter offers to stay for six extra months, if you are willing to take a little money off of the monthly rent, you can solve a vacancy problem.
What if your building needs a paint job, and one of the renters is a professional painter? You can make a deal with them to take some money off of their rent if they are willing to paint your building.
Being flexible when scenarios like those come up can be key for making both sides happy and keeping tenants in your apartment.
Master Negotiating a Lease Renewal
These are three of the most important tips for negotiating a lease renewal. If you do these, then you can offer good flexibility on your terms while keeping tenants satisfied.
Do you want more property management tips? Contact us with your questions today.
