Expiring your Leases is something you should think about.
Even though I own a lot of investment real estate, I had never put much thought into when my leases expire. I focused on not having multiple leases in the same building expire at the same time and, whenever possible, never expiring a lease between November and February. With these safeguards in place, I thought I could cut down on multiple vacancies at the same time. What I found out was that I still have to worry about advertising, showings and my upcoming vacancies almost every month. The old saying is true – you really do learn something new every day. This week I met two longtime investors who have most or all of their leases expire May 31st. They had some very good reasons:
- You only need to work on leasing at one concentrated time per year.
- Your advertising dollars go further, as you can place general ads in the newspaper. Because you have multiple units to show, you can accommodate almost any prospective tenant.
- By setting your lease renewal dates in the spring (preferably June 1), you’re targeting the strongest time of the year to lease your properties.
- Your existing tenants may have more options if they wish to move to another apartment in one of your other properties.
To begin the lease consolidation process, change the expiration dates to line up with May 31st as your renewals come up. There is no law that all leases must be 12 months long (with the possible exception of Section 8 tenants), so why not a 17 month lease? Longer is better for both you and your tenants. All the tenants I talk to don’t really care how long the lease is when you tell them it is locking their rent for the term! The process to move your leases to June 1st start dates may take a year or more, which works out fine for me because I can’t physically work on all my properties at the same time. In the event that more than a few existing tenants do not renew, I plan to make some of my leases expire in May, some in June and some in July, which allows me time to work on each unit.