Earning income from a rental property is an exciting opportunity for an investor. After all, over 44 million Americans currently rent their homes. But it's not without problems once you're a landlord.
However, there are plenty of ways you can protect your investment. One way is to take your time to put together a proper rental renewal agreement.
Here are some common mistakes property owners make when finalizing lease renewals, plus some tips for avoiding these problems.
Not Reviewing the Current Lease
Landlords must review the current lease agreement before finalizing a lease renewal. Failure to do so could lead to disputes with legal consequences since some of the information in that lease could be outdated.
You must also use a lease renewal to add new rules and regulations in line with current rental law.
That may be to stay in line with legal requirements, such as safety features. Or you may have other considerations, such as insurance costs, which means you want to add new stipulations into a lease agreement.
Not Checking the Market Rate for Your Rental
Rental rates around the US are on the rise. In Oregon, the rental cap increased by 14.6% for 2023.
Landlords who fail to check the current market rate for their property when arranging lease renewals could be missing out on potential income.
Without up-to-date market research, landlords risk renting their property for less than its worth.
Conversely, suppose the market rate is higher than the current lease rate. In that case, landlords could face the uncomfortable prospect of raising the rent for their tenants – resulting in a strained relationship or even a tenant turnover.
Forgetting the Signature
Getting your tenant's signature might seem obvious, but mistakes do happen. But this can be a serious problem for a property owner.
As a landlord, forgetting to get your tenants to sign a lease renewal could expose you to financial risk.
Without a signed agreement, tenants could decide to leave a property with no consequence, leaving you with an unpaid rent bill and scrambling to find another tenant.
Not Issuing Copies of the Signed Lease
Without a copy of the final signed lease renewal, tenants may be unaware of their new obligations and unable to fulfill them - potentially resulting in legal action against the landlord if they aren't provided with a copy.
To avoid this, make sure tenants are aware of and agree to the new terms outlined in the lease renewal.
Forgetting to Add Late Payment Penalties
Landlords must always add a provision for late payments, including penalties. And this must be in the lease renewal.
Without it, tenants may not take your payment timescale seriously for the remainder of the lease period. That could leave you with additional costs in the short term and problems with your rental income long term.
Handling Lease Renewals With Ease
Lease renewals might seem like a scary step for a property owner. Making the wrong move could cost you money. So you must get professional help from experts.
Our property management services team has the experience and knowledge to protect your investment. Why not contact us today to see why management services are popular for many real estate investors?