Whether you charge nothing for this fee, or a small amount, getting a substantial fee for this service is quite easy to justify with prospective or current clients.
Guest post – Darren Hunter – DarrenHunter.com
You can charge a solid lease renewal fee even when your competitors charge nothing to very little, and we will show you how!
First, understand the cost of a non-fixed term lease
There is a BIG difference between a payout for a landlord (what they can charge a tenant) in the case of a tenant breaking a fixed term lease, compared to the amount that can be claimed back from the tenant should they simply give notice on a non-fixed term lease (a periodic lease).
If a tenant gives notice and breaks a fixed term lease (depending on your state legislation) you can charge rent until a new tenant is secured, part or full letting fees and advertising/marketing costs and other costs as well, depending on what other fees you might charge.
However, we can all agree that a landlord is far better off with a tenancy on a fixed term lease financially than if the tenant gave notice on a non-fixed lease (and in this case all you can charge a tenant is rent to the end of their legal period of notice).
For example, let’s say you can claim back from the tenant on a fixed term lease your letting fee and marketing costs. What does this add up to in dollar value?
$500, $750, $900? Only you can work this out.
Plus, add on the rent loss factor of possibly several weeks rent loss (yes, calculate this in $$), it isn’t hard to see that this can add up quite considerably.
From this point, we can see that a landlord with a tenancy on a fixed-term lease is far better financially than a non-fixed lease.
Understand the cost of a tenant default
If a tenant defaults on their rent during a fixed term or a non-fixed term, the two scenarios are played out completely differently when it comes to making a landlord insurance claim.
The amount that can be claimed back depends on the insurance company that is providing the cover (yes, you need to have quality landlord insurance in place for this to work for the landlord).
WARNING: It must be said that there are landlord insurance policies available, supplied by some financial institutions that will completely deny a claim should a tenant default in rent on a non-fixed term policy.
Again, another compelling reason why a tenant should be kept on a fixed term lease.
Darren Hunter - of darrenhunter.com is a national and international property management trainer, speaker, consultant and authority on property management, specialising in fee maximisation and profitability as well as time and stress management and property management productivity.