We’re not going to lie: it’s been a challenging start to the decade. Between lockdown restrictions, tumultuous world events and a slowing economy, plenty has happened over the past six months.
The pandemic has affected every aspect of our lives — and that includes the rental market. With more businesses shutting up shop and unemployment rates climbing, tenants are feeling the pressure. And if you’re a property manager, chances are you have landlords coming to you left, right and centre, asking for advice on whether to renew a lease during COVID.
So, should you advise them to renew a lease for a tenant, or call it a day and search for a replacement? We weigh up the key considerations below.
Should you renew a lease during COVID? 3 essential considerations
Before making any decisions or giving any advice, it’s helpful to have an idea of the market trends. The rental market has been significantly affected by the pandemic; however, the degree of this impact varies depending on the suburb and the demographic of the tenants.
If you’re not sure where to begin when advising on the renewal of leases and tenancy agreements, these questions are a good starting point:
What does the tenant profile look like?
If the tenants are professionals, working in hard-hit sectors (like retail, tourism or hospitality), they’re more likely to feel the effects of COVID-19 than a professional couple working in digital marketing or website development. The same goes for the local demographics: if it’s a predominantly backpacker and international student hub, there’s likely to be a bigger impact with job losses than a suburb that’s mostly made up of families.
And no matter who the tenant is, the best approach is still to reach out to the tenant ahead of their lease renewal agreement:
“We are continuing with business as usual, which means inviting all tenants to stay as their leases as they come to expire. As a basic need being food, water and shelter we want to make sure our tenants have that security and comfort of a home. Tenants are approached individually to have a conversation about their situations and what their plans are moving forward.” – Tamsin, Property Manager at Belle Property-Tamsin Wilson, Property Manager at Belle.
How long will it take to find a replacement?
If you or the landlord do choose not to renew the lease agreement, you’ll be faced with the task of finding a new tenant to replace them when they leave. However, in a post-COVID climate, this is easier said than done.
The number of discounted advertised rentals has shot up dramatically in capital cities like Sydney and Melbourne, as property owners engage in a massive price battle to secure tenants. Put simply; there’s a lot of demand out there. Landlords need to be aware that their property might not be filled by another straight away, or they may need to discount it to lock down a tenant.
“We’re encouraging the landlord to consider all the factors when it comes to their property investment. Securing tenancy with a renewal for another 12 months at a 10% reduction in rent now will provide security for their investment long term.”– Tamsin Wilson, Property Manager, Belle Property
Which suburb is the property located in?
Some suburbs and areas have been turned upside down by the pandemic, while others have remained unscathed.
If the rental property is located in an area where occupancy rates and rental rates have remained unchanged, it could be worth searching for new tenants. However, if the rental prices of properties in the surrounding suburb have taken a hard hit over recent months, it might be a sign that competition is fierce — and landlords may have to discount their property or leave it vacant as a result.
For example, demand in Port Macquarie, NSW has stayed strong despite the pandemic.
“[We are] not seeing rent reductions on the mid-north coast of NSW…People have been pretty proactive — taking the opportunity in that time to either move into a bigger place. I think also with budgeting, we saw a lot of people downsize or move into a more affordable place.”– David Gray, Property Manager at Elders.
So where do you get this data? One trusty spot is in the local paper or suburb profiles on property publications like Domain and Real Estate. If you’re a FLK user, it’s a piece of cake: we have a monthly database of stats in our system for property managers to access any time, anywhere.
To renew or not renew?
Unfortunately, there’s no clear cut answer on whether or not to renew a lease during COVID-19. It ultimately comes down to the location of the property, the tenant demographics, and the landlord’s risk appetite. The best thing you can do as a property manager is to stay on top of the latest trends in the market, so you can help landlords to make an informed decision.
“We are in a position of being able to give our professional advice to each owner on the current market. All owners are appreciative to have clear and transparent understanding of the market and understand the risks and rewards of renewing or not renewing a lease,“-Tamsin Wilson, Property Manager at Belle.
However, with so many tasks on the to-do list and a rapidly changing market, it’s hard to stay informed AND keep landlords happy…but with FLK it over, it’s simple.
We automate the repetitive admin work; you can focus on people — not paperwork.
From new leases, renewals to termination notices, rent increase letters, sales agreements, and even managing agency agreements, we’ve got you covered with our robust platform. With over 80,000 signed leases and countless hours saved, see how FLK can work for you.