Author Topic: Negotiating Rent with Landlord on Lease Renewal  (Read 475 times)

Michael in ABQ

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Negotiating Rent with Landlord on Lease Renewal
« on: July 15, 2020, 01:59:54 PM »
We rent a house for $1,650 per month. The Property manager sent an email a couple of days ago to remind us our original 15-month lease expires at the end of August. That was followed up today with a notice that the landlord is offering an 1-year extension for $50/month more, or we can go month-to-month and also pay $50 more. That's a 3% increase which feels high given that we're in a recession and having a solid tenant is no longer guaranteed. We've always paid on time and only had a few minor service calls - in other words been model tenants.

On principle I plan to counter, but our bargaining position is weakened by the fact that we probably can't find another 5-bedroom home to rent. As it is, we offered $25/month extra over the asking price when this one came on the market as it's located just a few minutes drive from my in-laws which is very convenient for having them watch some of the kids. We have 6 kids so a 5-bedroom house, while not absolutely necessary, is necessary.

On the other hand, if we told them we're moving out in 6 weeks they could probably find another tenant. But from the landlord's perspective they're going to have say a week of downtime between tenants, which equates to about $400 - plus any other turnover costs (minimal as everything is in good shape). Plus, they probably have to pay the property manager a fee for finding a new tenant, likely hundreds of dollars. So essentially they would be out the extra $600 we would be paying in rent over the next year.

I'm planning to counter with we renew for a year with no increase and remind them that I have a steady federal government job and we've been excellent tenants. Should I throw those numbers out as well? The property manager's incentives are not necessarily aligned with the landlord's in this case as they probably make money finding a new tenant.

Any other advice on how to handle this? All of this is further complicated by the fact that I'm deployed and we physically wouldn't be able to move until September - which would ultimately cost at least $600.

cool7hand

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Re: Negotiating Rent with Landlord on Lease Renewal
« Reply #1 on: July 15, 2020, 02:43:10 PM »
Please forgive me if I've misunderstood, but what I see in your post are guesses and fear. What you need is to understand  with far more certainty what is explained below as each side's BATNA. If you understand each side's BATNA, you eliminate the fear. There isn't a lot of room for fear in a winning negotiation.

Let's talk about BATNA. You can't negotiate well until you do the work (1) to find another few places to rent that work, including all expenses to up and move; and (2) to make sure you understand the landlord's likely losses if the landlord fails to renew with you. Your other rental option don't have to be perfect because perfect is for whinypants and you and your spouse will model for your kids that any transition is good. You also only need to be close on the landlord's potential losses, but the closer the better. You need both to know each of your BATNAs (best alternative to a negotiated agreement, see Getting Past No and Getting To Yes). The BATNA tells you what to offer, where you want to end up, how hard to push, when to say no, and when to say yes.

You only know some of the facts that you need to know to identify your BATNA. It reads as though you don't really know what other houses are out there and for how much. If your assumption is right that we're in a recession and people have less liquidity, you should find plenty of places for rent that fit your needs and for the right price. Given that the landlord is offering a month-to-month rent, the only additional rent you'll pay is the increase if you fail to reach an agreement to your liking. Your deployment only determines when you are available to move, not if. As soon as you are home, you can break the lease in I suspect 30 days.

The post also reads as though you like where you live and you don't want the inconvenience of moving elsewhere if you alienate your current landlord. Maybe you can save money elsewhere, and all-in with moving expenses, etc. you'll make your money back in fewer than six months. But maybe your family values certainty and continuity such that you don't care about the additional cost. That's a personal call that only you and your family can value. But the only real impediment to a better deal is fear and lack of information.

I'll tell you when you'll know that you have enough information. You'll have enough information when you answer the above questions, write a follow-up post, and realize in the writing that you already know what to do. Just be kind enough to pass it on by telling all of us what you did and why.

I hope that helps!

Michael in ABQ

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Re: Negotiating Rent with Landlord on Lease Renewal
« Reply #2 on: July 15, 2020, 03:20:15 PM »
Please forgive me if I've misunderstood, but what I see in your post are guesses and fear. What you need is to understand  with far more certainty what is explained below as each side's BATNA. If you understand each side's BATNA, you eliminate the fear. There isn't a lot of room for fear in a winning negotiation.

Let's talk about BATNA. You can't negotiate well until you do the work (1) to find another few places to rent that work, including all expenses to up and move; and (2) to make sure you understand the landlord's likely losses if the landlord fails to renew with you. Your other rental option don't have to be perfect because perfect is for whinypants and you and your spouse will model for your kids that any transition is good. You also only need to be close on the landlord's potential losses, but the closer the better. You need both to know each of your BATNAs (best alternative to a negotiated agreement, see Getting Past No and Getting To Yes). The BATNA tells you what to offer, where you want to end up, how hard to push, when to say no, and when to say yes.

You only know some of the facts that you need to know to identify your BATNA. It reads as though you don't really know what other houses are out there and for how much. If your assumption is right that we're in a recession and people have less liquidity, you should find plenty of places for rent that fit your needs and for the right price. Given that the landlord is offering a month-to-month rent, the only additional rent you'll pay is the increase if you fail to reach an agreement to your liking. Your deployment only determines when you are available to move, not if. As soon as you are home, you can break the lease in I suspect 30 days.

The post also reads as though you like where you live and you don't want the inconvenience of moving elsewhere if you alienate your current landlord. Maybe you can save money elsewhere, and all-in with moving expenses, etc. you'll make your money back in fewer than six months. But maybe your family values certainty and continuity such that you don't care about the additional cost. That's a personal call that only you and your family can value. But the only real impediment to a better deal is fear and lack of information.

I'll tell you when you'll know that you have enough information. You'll have enough information when you answer the above questions, write a follow-up post, and realize in the writing that you already know what to do. Just be kind enough to pass it on by telling all of us what you did and why.

I hope that helps!

A search on Zillow (not definitive of the whole rental market, but representative) shows only five 5-bedroom homes available in the entire city, the cheapest at $1,800 (further from work, school, family) the rest at $2,300+. There's a smaller 4-bedroom in the same area as we're in for $1,800 a month. All the other cheaper 4-bedrooms are much smaller or in inferior locations.


After talking with my wife we decided to split the different and offer to sign a one-year lease at $1,675 a month while reminding the property manager/landlord that we originally offered $25/month above asking. This way both sides get a win.

Ultimately we both stand to lose money if we decide to not renew and move-out in the next month or two. The landlord is only out money while we're out money, a considerable amount of time spent actually packing and moving, and the stress of finding somewhere new to live.

legalstache

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Re: Negotiating Rent with Landlord on Lease Renewal
« Reply #3 on: July 15, 2020, 04:56:25 PM »
I started writing my response to your original post before seeing that you'd provided an update. I was also going to suggest countering at $25/mo. You're right it's in both of your best interests for you to continue as a tenant. You could also consider asking for longer than a 12 mo renewal term.

JetBlast

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Re: Negotiating Rent with Landlord on Lease Renewal
« Reply #4 on: July 15, 2020, 05:05:28 PM »

A search on Zillow (not definitive of the whole rental market, but representative) shows only five 5-bedroom homes available in the entire city, the cheapest at $1,800 (further from work, school, family) the rest at $2,300+. There's a smaller 4-bedroom in the same area as we're in for $1,800 a month. All the other cheaper 4-bedrooms are much smaller or in inferior locations.


After talking with my wife we decided to split the different and offer to sign a one-year lease at $1,675 a month while reminding the property manager/landlord that we originally offered $25/month above asking. This way both sides get a win.

Ultimately we both stand to lose money if we decide to not renew and move-out in the next month or two. The landlord is only out money while we're out money, a considerable amount of time spent actually packing and moving, and the stress of finding somewhere new to live.

Property markets are very tight in many cities right now because people aren't moving.  People aren't leaving jobs voluntarily.  The ones that have lost jobs have been propped up temporarily through the coronavirus stimulus and enhanced unemployment.  In six months the picture might look very differently as the economic fallout really begins to be felt, but not yet. 

Here's a press release from RE/MAX on their May 2020 housing market.  Albuquerque is specifically mentioned as having the lowest inventory of the 53 markets surveyed, with 0.9 months inventory.  That's homes for sale, but doubtlessly would impact the rental market for single family homes as people lose out on homes for sale and have to continue renting. It may not be as hard as you think for your landlord to replace you.

https://www.prnewswire.com/news-releases/remax-national-housing-report-for-may-2020-301078270.html

The expense and hassle of moving isn't worth it over a 3% increase and the landlord knows it, especially if your research is correct as it sounds like the proposed increase is still a little under market.  It doesn't hurt to ask to meet in the middle for only a $25 increase, emphasizing that you've been model tenants that they'd be smart to keep, but if they say no I'd just suck it up and agree to the $50 increase. 


Michael in ABQ

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Re: Negotiating Rent with Landlord on Lease Renewal
« Reply #5 on: July 15, 2020, 11:05:23 PM »

A search on Zillow (not definitive of the whole rental market, but representative) shows only five 5-bedroom homes available in the entire city, the cheapest at $1,800 (further from work, school, family) the rest at $2,300+. There's a smaller 4-bedroom in the same area as we're in for $1,800 a month. All the other cheaper 4-bedrooms are much smaller or in inferior locations.


After talking with my wife we decided to split the different and offer to sign a one-year lease at $1,675 a month while reminding the property manager/landlord that we originally offered $25/month above asking. This way both sides get a win.

Ultimately we both stand to lose money if we decide to not renew and move-out in the next month or two. The landlord is only out money while we're out money, a considerable amount of time spent actually packing and moving, and the stress of finding somewhere new to live.

Property markets are very tight in many cities right now because people aren't moving.  People aren't leaving jobs voluntarily.  The ones that have lost jobs have been propped up temporarily through the coronavirus stimulus and enhanced unemployment.  In six months the picture might look very differently as the economic fallout really begins to be felt, but not yet. 

Here's a press release from RE/MAX on their May 2020 housing market.  Albuquerque is specifically mentioned as having the lowest inventory of the 53 markets surveyed, with 0.9 months inventory.  That's homes for sale, but doubtlessly would impact the rental market for single family homes as people lose out on homes for sale and have to continue renting. It may not be as hard as you think for your landlord to replace you.

https://www.prnewswire.com/news-releases/remax-national-housing-report-for-may-2020-301078270.html

The expense and hassle of moving isn't worth it over a 3% increase and the landlord knows it, especially if your research is correct as it sounds like the proposed increase is still a little under market.  It doesn't hurt to ask to meet in the middle for only a $25 increase, emphasizing that you've been model tenants that they'd be smart to keep, but if they say no I'd just suck it up and agree to the $50 increase.

This is pretty much the plan. Ultimately it's $600 over the next year. The days we would spend packing, moving, and unpacking a 5-bedroom house are not worth that much.

bloodaxe

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Re: Negotiating Rent with Landlord on Lease Renewal
« Reply #6 on: July 16, 2020, 11:15:49 AM »
If they say no, I would check out 3 bedrooms as well. Have the girls in one room and boys in the other. If you have any babies they can stay in the bedroom with you.

mm1970

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Re: Negotiating Rent with Landlord on Lease Renewal
« Reply #7 on: July 16, 2020, 02:27:57 PM »
If they say no, I would check out 3 bedrooms as well. Have the girls in one room and boys in the other. If you have any babies they can stay in the bedroom with you.
This would not be worth saving $600.

I don't even have to look at rentals in Albuquerque to know that.

Michael in ABQ

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Re: Negotiating Rent with Landlord on Lease Renewal
« Reply #8 on: July 16, 2020, 02:57:44 PM »
If they say no, I would check out 3 bedrooms as well. Have the girls in one room and boys in the other. If you have any babies they can stay in the bedroom with you.
This would not be worth saving $600.

I don't even have to look at rentals in Albuquerque to know that.

5 boys and 1 girl, would not work well. Nor would putting a 2-year old with a 12-year old.