Calendar icon January 9, 2024

How to Craft a Lease Renewal Letter That Wows Your Residents [Free Template]

What if we told you it's possible to craft a lease renewal letter that makes everyone happy – even when you raise the rent? 

That’s right! It’s absolutely possible, and it’s all about positioning. How do you choose pricing? How do you then position and present your lease renewal offer? How do you do this in a way that promotes clarity, builds trust, and drives the business results you’re after? 

That’s what we’re covering in today’s topic: Crafting a lease renewal letter. We’ll dig into what it is, what you should include, and why an effective letter is so important for all stakeholders. We’ll also provide an example and a template you can use yourself.

What is a lease renewal letter?

A lease renewal letter is a document sent by a landlord or a property manager to notify residents that their lease is nearing its end, and to present the terms of a new lease or simply give the option to renew. It should be sent to tenants at least 60-90 days before the lease’s expiration date to give them advance notice of changes and enough time to make their own decisions. 

Your lease renewal notice should give residents a clear understanding of the timeline and their options and ideally make it easy for them to renew their lease – if that’s what you and the investor want.

If you don’t want to renew or are pursuing an eviction, you will follow a different process.

 

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What does a lease renewal letter include?

At its most basic, a lease renewal letter is just a statement of the ending of an old lease and the beginning of a new one. But a really successful letter should do more than that.

The goal of a lease renewal letter should be to present any changes in a way that makes it clear to the resident why those changes are happening, and how it can be a benefit to all parties. It should smooth out the transition and position the renewal in a way that – as we said above – promotes clarity, builds trust, and drives the business results you’re after.

Are you raising rent this year? (You probably should be increasing rent each year, according to the market.) How can you position this change in a way that satisfies your investors and your residents? One example is to include a clear comparison of the cost of moving vs. renewing. 

Another great way to position those changes is to outline resident benefits that are included in the lease. A resident benefits package can drive unique value for residents to renew. 

These are all important considerations in framing the letter. With that in mind, here are the practical components of a lease renewal letter:

Personalization

Like any formal document, you should include your name and address, and the resident’s full name and the property address at the top. Also, put the date the letter is being sent. 

This is important for your records, but also to demonstrate respect and professionalism in the document.

Lease expiration date

Start with a clear statement that their current lease is coming to a close and include the exact expiration date of their current lease.

New lease terms

Outline the new lease agreement and terms of the lease, including the duration of the renewed lease. The resident should be able to read the letter and understand exactly what is changing from the original lease. Your goal is to help them make an informed decision based on those changes.

Description of the benefits included with the lease

If you’re offering something like a Resident Benefits Package, the lease renewal letter is a great opportunity to remind residents of those benefits. Concisely and clearly outlining the value they get from the RBP is a great way to position yourself for success in the next year. 

The lease renewal letter is also an excellent opportunity to introduce a resident benefits package if it’s new to your residents. Outline the valuable benefits and how it will drive better quality of life, improve financial stability, and even cut long-term costs for your residents.

Rent increase (if applicable)

Another part of the new lease terms might be a rent increase. The amount of a rental increase should be based on the market in your area. In this section, it’s extra important to add context for the resident. Include the estimated cost of moving, the market trends, and other factors that go into the rent increase. 

Help them understand that you’re not fleecing them! Give enough clear context to explain that the increase ensures that you and the investor can afford to continue to offer the high-quality home and benefits they’ve become accustomed to. 

A Note about Rent Increases: This is a tricky subject for a lot of property managers. 

For self-managing landlords, sometimes the topic of increasing rent can feel daunting. After all, what if the resident doesn’t like the increase and decides to move? That’s a lot of cost and effort for turnaround if you just have one rental property to manage and it’s not your full-time job. 

The problem, though, is that if you’re not incrementally increasing rent, one day, you’ll discover a big gap between your rental price and the market price. Then you’re faced with an even messier situation of bumping up the price by a lot.

Even among professional property managers, this question can get tricky. Some people just raise the rent by an arbitrary amount. However, the ideal approach is to evaluate the market in your area and ensure that your properties are in line with that pricing.

Why is a lease renewal letter important for tenants and landlords?

Remember, we’re aiming to provide clarity, build trust, and drive business results. A letter at the outset of a new lease can do all three of these things. 

For tenants in a property, a lease renewal letter helps set out all the factors they need to consider when making a decision for their coming year. It helps reduce disruptions in their living situation and sets them up for success and satisfaction in their next lease term.  

For the real estate investor, a renewal letter is critical to achieving any necessary new agreements, rent increases, etc. A well-composed letter will help reduce turnover (and thus turnover costs) and increase satisfaction. 

And, for a property management company, a lease renewal letter gets everyone on the same page, ensures consistent rental income, and can position a new lease as a triple win for residents, investors, and property managers.

Lease renewal letter template and how to customize it

Here's how to customize the template for your own use:

Date and contact information

Since this is a legal document, include the date and your contact information at the top. Below that, include the current tenant’s name and the address of the property in question. 

Make sure to personalize the salutation as well, such as: “Dear [Tenant First Name] [Tenant Last Name].”

Friendly introduction and framing

Write a friendly greeting that establishes the value they provide to you. This, of course, can be tweaked for different residents, depending on your experience with them. But an example is that you can thank them for being wonderful tenants and explain that this letter is to make the renewal process as easy and frictionless as possible for them. Then, to frame what's coming, explain that your company aims to make their resident experience the best it can be and list a few of the updates you're making to services or benefits, or simply review what you've been offering.

Key details about lease expiration

Clearly outline the end of their current lease term with the lease end date. You can include reminders on what was included with that existing lease and explain that you are happy to renew with them for another year (or whatever lease term you want).

Terms and conditions of the new lease

Next, clearly outline the terms and conditions of the new lease. What is the duration of the lease? Has anything changed in what the residents are agreeing to? 

This is where you’ll also include any rent increases. You can customize this for your area, but it’s good to address resident expectations here. Give context on the cost of a move and the changing cost of property/maintenance/rentals/etc. in your market, and how that affects the changes in rent amount.

Next steps for the resident

Explain what you need next from the resident. Typically, all you need is for them to sign the letter and return it to you. Let them know how they can reach you with questions or requests.

Signature

Sign off with a friendly goodbye and include your signature along with your printed name and the date again.

Next steps after sending a lease renewal letter

Okay, so you’ve sent your brilliantly crafted, perfectly positioned lease renewal letter. What’s next? 

Well, the resident may simply sign on the dotted line and send it back. Or they may have questions, requests, or negotiations. The third option is they may let you know they don’t intend to renew. Here’s how to deal with those scenarios.

Consider tenant requests

It’s completely reasonable to expect that some residents will have questions about the letter or may even contact you with requests to make changes to the new lease terms. 

Property managers should be prepared to field those requests, be open-minded to reasonable ones, but also be ready to explain if a request can’t be accommodated. Showing some flexibility is a great way to get resident buy-in, but ultimately the decision isn’t always up to you. 

Be ready again with context and positioning to explain the changes in a positive way. You made the changes to benefit everyone, so make that clear when communicating with residents.

What to do if a tenant declines

You have different options if a tenant declines to agree to the new terms. You could change the tenant’s lease terms, transition to month-to-month, etc. Or, you can proceed with a non-renewal and prepare the property for listing and getting a new resident. 

This should trigger your team’s move-out processes. Request a written notice of the resident’s intent, establish a move-out date and move-out instructions, including what will happen with the security deposit. Then, your team will want to begin the process of marketing for a new tenant.

Legal considerations

Lease renewals must comply with state and local laws, avoid discrimination, and be clear about the rights and responsibilities of both parties. If you are terminating a lease in a state that requires a “just cause,” you need to provide a legitimate reason for not renewing the lease.  

The key is to know the requirements in your jurisdiction. It’s also a good idea to have a lawyer review your lease renewal template before you make it standard across your properties.

Final thoughts

When it comes time to renew a lease, you have a unique opportunity for positioning with your residents. A lease renewal letter is your chance to reconnect on terms, update expectations, increase rent if needed, and more. And the way you compose that letter – and the way you position the changes – can make all the difference in your renewal rate and resident satisfaction. 

It’s also the perfect opportunity to introduce a Resident Benefits Package and remind residents how your role is to add value to their living situation. 

Use our guide above to ensure your lease renewal notice is clear, helps build trust, and helps drive business outcomes for you and your investor clients.

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How to Optimize Operational Frequency with Processes and Software

Property management software is currently helping property managers establish efficient and reliable processes at a higher rate than ever before in the PM industry. With that development in the proptech industry has come the development of tech for self-managers that has changed the capacity of the accidental landlord. Thus, the demand for efficiency at scale has risen in order to separate the professional from the amateur, and the establishment of processes that allow such a thing has become a critical topic for professional property managers. Optimizing property management processes Carter Fleck of Triton Property Management, a growth-oriented firm out of northern Virginia that is approaching 300 units with larger goals for 2024, joins us to share his expertise on process definition. Fleck is the General Manager responsible for operations and strategic growth, and he has been developing effective processes to ensure efficiency at Scale at Triton, and in the process, he has garnered an understanding of how to do so. “A lot of failing,” says Fleck. “In the early days, we were getting a lot of good and bad feedback, but typically the bad feedback is what you adjust off of.” Fleck believes that assumptions are the enemy when it comes to defining procedures and sourcing software for your PMC. “The image that we use is if you're going to build a sidewalk before people even start walking on a field, it's kind of dumb. You have to see where people will walk first, and then you'll build a gravel path. So number one, you see where they walk, see where their intentions are in the grass, then you build a gravel path. And then eventually, once that walkway is established, that's where you build your processes and procedures.” The analogy is a visualization of the concept that you have to see how people operate before you can establish processes to make how they operate more efficient. Fleck encourages the negative experiences of process breakdown and cites them as the only way to really nail down what your processes should look like. “Over time, between the tenants giving feedback and owners giving feedback, we adjusted our processes. It's a mix between figuring out where the owners walk and where the tenants walk, and then building paths that align.” Fleck details an example of how Triton adjusted its process after an assumption it made got challenged: "We had an assumption that payment plans were helpful for residents," says Fleck. "And so the way we handled delinquency is we would reach out to them and would be like, ‘you need to pay this. Do you have a payment plan option?’ And they would always say yes. Our process was we'll put you on a payment plan, we'll invite you to a payment plan, you'll accept the payment plan, and then we'll monitor the payment plan. That in itself was a lot of work, but we thought it was doing well. But some of the owners that we had managed for mentioned that another property manager doesn't allow any payment plans. And if you're not fully paid up by the end of the month, then the eviction process starts if you’re over $500 due. So we're like 'alright, well, we'll serve you in that we'll change our processes.' And we did, and our delinquency percentage shrunk significantly. So, consistently, by the end of every month, we're around 5% APR. Whereas with payment plans we're like 5 to 10%.” Fleck obviously credits seeing the assumptions in motion as what prompted the need for process iteration, and he firmly believes that making too many of these assumptions is one of the biggest mistakes growing property management companies make. Like any business experiencing growth, process definition is critical to achieve efficiency at larger volumes. What Fleck is essentially advocating for is processes based on what you know, not what you think, and there is a big distinction. Managing property management software Fleck has installed both general and tech-based processes, and cites that understanding of how people interact with processes as the key in both areas. "They don't focus on user experience. That's really important. Number one, how the tenants like the tech, but specifically how the people who are using the tech are gonna adopt it. So when we were choosing a rent inspection software, we had so many people recommend one, software and I, we almost pulled the trigger on it. But then I was like, let's do a trial run on both these two. And we chose the other one because it was way better user experience for property managers. So user experience, both for us and for residents." Tech is a tool that is ultimately as good as its users, and if it's not used correctly or at all, its potential is wasted. An over-reliance on technology can actually go hand-in-hand with an under-reliance, as both often spring up from a lack of understanding of how to choose, implement, and manage it. In this vein, Fleck can't recall many property managers who operate with too much tech. As long as you're not purchasing redundant software and you've done and continue to do your due diligence, tech-based process can make your business more efficient. "I more often find myself having that conversation," says Fleck. "When I'm talking to property managers in my sub-market, who aren't connected with like a NARPM, who aren't connected with like a Crane group, or who aren't connected with a Second Nature, aren't connected to the tune of what the property management industry is doing and the cutting edge of it, I'm just like, 'you could save so much of your time and you could scale this so much more if you only even if you just had tenant Turner, or if you had LeadSimple.'" No matter what your story is a property manager, if growth is in the cards, so is process and technology refinement. Hopefully, Fleck's experience in these areas can help you stay efficient and organized as door counts grow.

Calendar icon April 19, 2024

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Why offer a tenant benefits package?

In the residential real estate sector, like everywhere else, residents and property investors alike are getting younger – and with this generational shift comes expectations for a certain level of convenience and support. To put it bluntly, today’s residents want their needs proactively anticipated. It’s something they're willing to pay (and stay) for. That’s where a tenant benefits package comes in. In this article, we’ll explore what a tenant benefit package is, how it improves the experience for both property managers and tenants, and crucial mistakes to avoid. Before we get into the details, we want to give a shoutout to our very own “Resident Benefits Package” – which is how we refer to the benefits comprised in the “tenant benefits package.” “Tenant” is not yet a legacy term, but we here at Second Nature are trying to evolve it. That’s because, in our experience, property managers work hard to make renters feel like they’re not just parties to a contract – they’re residents. On one hand, this is just humans being humans, but on the other hand, it also encourages them to invest in care for their new home and add value to the property. Ready to get started now? Build your Resident Benefits Package today. What is a tenant benefits package? A tenant benefits package is typically a bundle of services, conveniences, and provisions offered by a property manager on top of the basic lease agreement. They represent a triple-win situation for property managers, residents, and property owners, as they enhance the overall rental experience, generate additional income, and protect the real estate investment. It might include conveniences such as online monthly rent payment options, or portals for submitting maintenance requests and tracking their status. It could also include various financial perks, such as credit rating improvements that are contingent on on-time rental payments, or discounts on nearby services such as fitness centers. It might also include amenities ranging from move-in concierge or utility set-up services, to identity protection services, to HVAC filter delivery. The cost for resident benefits packages is typically included in the lease and added as a monthly fee, with the fee being dependent on the specific benefits. Indeed, the benefits contained in a tenant benefits package will vary depending on the property manager and the type of rental property. The overall goal is to provide tenants with an enhanced quality of life while simplifying the experience of renting. At Second Nature, we pioneered the only fully managed resident benefits package, in response to PMs who wanted to make their business stand out. Our RBP includes an array of services and supports for residents, from filter delivery to credit building to maintenance. Why should property managers offer a tenant benefits package? Beyond the triple-win considerations mentioned just above, there are compelling and concrete reasons why property managers should offer tenant benefit packages. We'll turn to these now. Ancillary revenue Some tenant benefit packages include optional services or add-ons that can generate additional revenue streams for the property manager. This might include things like renter insurance or HVAC filter delivery. Resident experience Tenant benefit packages deliver numerous savings and value to tenants, beyond the value they would get if they were obtaining the same benefits "à la carte." Additionally, by offering additional services and conveniences, benefit packages can make tenants feel valued and more satisfied with their living experience. For instance, maintenance hotline requests, tenant portals, and air filter replacements all make life easier. Add-on services like identity theft protection can offer a sense of security. And discounted renters insurance coverage, utility concierge services, or other perks can save tenants money. Decrease tenant turnover and vacancy rates In a competitive rental market, tenant benefit packages can be a major differentiator toward boosting retention rates and reducing vacancy rates. Properties that offer these packages can also attract a wider pool of qualified tenants, and potentially command higher rents. Note that certain benefits in the package, like online rent payments and maintenance requests, can automate tasks and free up the property manager's time. This allows them to focus on more value-added initiatives. How does the tenant benefits package improve the tenant experience? Tenant benefit packages can significantly improve tenant satisfaction in several ways, by making life easier, more convenient, and potentially more affordable. For instance, if an online portal (a baseline feature for most property management software) is included for rent payments and maintenance issues and requests, this eliminates the hassle of writing checks or waiting on hold to speak with someone about a clogged drain. In other words, tenants have the peace of mind of knowing they can manage their tenancy 24/7 from the comfort of their own devices. Some packages might include features like filter delivery services or regularly scheduled HVAC maintenance. This frees tenants from having to remember these tasks – and ensures their apartment is well-maintained. Certain packages might also offer "verified vendor" services – in other words, a vetted vendor network that can help provide a more secure feeling to residents when service providers are on-site. On the financial side of things, a benefits package might offer discounts with local suppliers for various goods and services, or on a renters insurance policy obtained through the property manager (with applicable waivers for residents who have their own insurance). This can save tenants money on a necessary expense. Some packages also help residents with their credit scores via credit reporting and credit building services, so they can transition from renting to home buying when the time is right. The idea is that the credit reporting program reports on-time rent payments automatically to all credit bureaus, helping residents build their credit simply by paying their rent on time. Some benefit packages include resident rewards programs that represent a powerful and positive incentive for on-time rent payments, including gift cards or cash. As far as living perks go, packages sometimes include added benefits such as access to fitness centers or community events. This provides tenants with additional spaces to relax, socialize, or stay healthy. Packages can include security deposit alternatives that serve to provide a means for residents to be financially liable for damages without having to pay a significant lump sum upfront, such as pure insurance, surety bonds, and ACH authorization programs. Ultimately, tenant benefit packages create a more professional and responsive image for the property management company, which helps tenants feel valued and allows them to experience a smoother, more stress-free rental experience. What are the mistakes to avoid when offering tenant benefits packages? Property management companies should take care to avoid certain pitfalls when implementing tenant benefit packages to ensure they are providing true value to tenants as well as delivering profitability to the PM company itself. For instance, it's important to ensure that the services you're offering are actually relevant to your target renters. For example, young professionals might appreciate discounts on gym memberships, while families might prefer pet-sitting services. You should also take care to clearly communicate what's included and not included in the package to new residents. Don't oversell the benefits – focus on how they genuinely improve the living experience. It's also very important to set realistic expectations for response times on standard maintenance requests, emergency maintenance requests, or virtual concierge services. Likewise, be clear on all available payment methods, as well as rent due dates, late fee structures, and any associated payment processing fees. If your package includes services from third-party vendors, ensure that these vendors are reputable and reliable. Research their customer service record and responsiveness to ensure a smooth partnership and a positive experience for tenants. Above all, regularly monitor the usage of different benefits within your benefits package. This can help you refine your offerings and ensure you're not spending where spending is not required. Looking for a Resident Benefits Package? If you’re looking for a “plug and play” resident benefits package, Second Nature’s RBP is the way to go. Designed to be easy to implement and simple to use, all the services it includes are managed by Second Nature – which means there’s no day-to-day upkeep required from the property manager: Second Nature keeps it running. It’s a simple way to grow your business and create great experiences that residents will pay and stay for. Learn more about our fully-managed Resident Benefits Package.

Calendar icon April 2, 2024

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