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WHAT A DIFFERENCE A YEAR MAKES!

Landlords & Tenants Share a Win-Win

Both Parties Avoid the Significant Costs of Turnover

“It’s a tough market to enter at retail prices and a poor reason

to sell indiscriminately; in 2027, buy selectively, sell selectively,

and make every decision property by property.”

I agree with this assessment. That said, in this piece I make a case for maximizing your and my ROI on existing rental properties and prospective renters … while delivering to tenants financial and time savings coupled with peace of mind. For you sports fans … a shared approach to offense and defense for both parties.

Stating the obvious …the standard lease term in Virginia for single-family homes, townhouses, condominiums and apartments is 12 months – one year. Let’s break with tradition and examine the net benefits to landlords and tenants when a two-year lease term is adopted.

Making the Case for Landlords

Background & Assumptions

Background: The best-supported statistic is that Virginia rent growth is modest on average but varies sharply by market and property type. For purposes of this example, we’ll assume Zillow’s Virginia broad rental-market measure that pegs the average rent across all property types and bedroom counts at $2,100, up $40 year over year … about a 1.9% bump.

So, given the following assumptions, let’s compare the benefits to both tenants and landlords of a two-year lease

Assumptions:

• $2,100 Monthly Rent (per Zillow)
• 1.9% - One-year Lease Rent Increase
• 1.5% - Second year of 2-Year Lease Rent Increase
• 2-Weeks Vacant
• Leasing Cost Equals Half of New Monthly Rent
• $2,140 Make-ready Costs

Comparative Results Over 24 Months

The two-year “win” from the landlord’s side … avoids the true costs in incremental labor, marketing, vacancy, and repairs to turn and re-lease the home. Renter retention and minimized turnover are the drivers.

Making the Case for Renters

The budget for a typical renter moving from one rental to another in Central Virginia runs $4,000 - $5,000 in upfront moving and rental-transition costs for a one- or two-bedroom apartment. This estimate assumes engaging professional movers and a new rental unit that requires a security deposit.

The following “costs to move” are often overlooked by renters. Staying with the monthly rent example above ($2,100/month) a realistic breakdown of moving expenses may look as follows:

• Moving and setup expenses: $800
• Application costs: $75
• Security deposit: $2,100
• First month's rent: $2,100

Note: Overlapping rent of the current unit can significantly increase the cash required.

Based on the above cost estimates, the total cash requirement would be approximately $5,075, before any overlap with the old lease and before return, if any, of all or part of the old security deposit.

So, for consideration by your or my existing or prospective renter … their two-year “win:

• Known housing cost for 2 years - $2,100/month in year-one;
• A 1.5% below-market increase in year two to $2,132;
• No costs to pay movers, deposits and application costs;
• Quality of life uninterrupted by a physical, time-consuming move.

Takeaways

A longer lease can benefit both tenants and owners.

A tenant enjoys certainty about housing costs and avoids the disruption and expense of moving. It’s an accepted sales principle that the drivers of our buying decisions are based on one or more of four “payoffs”:

1. Save Money,
2. Save Time,
3. Peace of Mind
4. Make Money

For renters … a two-year lease certainly fulfills the first three, and perhaps the fourth as well.

For Owners … all 4 … a blueprint for your presentations to existing & prospective renters.

Owners reduce or eliminate vacancy, make-ready work, and leasing costs. A two-year lease with a modest, pre-agreed increase can preserve more income over the term, even when market rent is rising … a plus in these uncertain times. That supports the KRS Holdings guiding principle …

Successful property management is based on simple math:

Add value to your assets, subtract unnecessary expenses.

A shared question for tenants and owners …

“Would you rather see the moving van arriving in 12 months or 24?”

Whether you’re managing one property or a growing portfolio, staying ahead of cost trends

is critical. We’re here to support you in evaluating your property performance, managing expenses, optimizing returns … and deliver proven successful property management.

Give us a call or drop an email. We’ll respond promptly to help you make informed,

confident decisions … plus maximize your rental property return on investment.