The methodology of pre-leasing a Filer rental property before it is open for move-in can be a controversial rental tactic. Some see pre-leasing as a strategy for property owners to avoid vacancies and to secure that they have a new tenant lined up before the current one moves out. It sounds fantastic, but there are several downsides to pre-leasing that you need to be acquainted with before giving it a shot. Let’s take a closer look at how pre-leasing works and some of the major disadvantages that go with it.
How Pre-leasing Works
In the pre-leasing process, a property manager will list and advertise a rental property before it is available for move-in. It’s possible that the current tenants have yet to move out because renovations or upgrades are still being made to the home. The property owner will get applications and probably even sign a lease with a tenant before the move-in date.
The Disadvantages of Pre-leasing for Property Owners
One of the first possible downsides to pre-leasing is that the property owner may not be able to completely ensure that the home will be ready for move-in on the agreed-upon date. Delays in repairs and renovations, as well as other issues, may push back the actual move-in date, causing difficulties for the pre-leased tenant. This could also open the property owner to legal action from the tenant if they cannot move in on the scheduled date.
If there is severe damage, the new renter may feel fooled about the property’s condition. This might trigger disappointment early on, setting a combative tone for the term of their tenancy. This is particularly the case if the issue is intensified by broken promises or excessive wait times. In such scenarios, it is not unusual for a tenant to take legal action against a Filer property manager.
Moreover, things can grow complicated if the current tenant changes their mind about moving out – even after giving official notice. The property owner may have to deal with the logistics of having two tenants legally contracted for the same rental home, which, as you can imagine, could quickly turn into a legal nightmare. The new tenant may be disappointed to find out that they will not be able to move into their new home as promised, and the current tenant may object to any attempts to get them to leave. That could easily ruin a previously positive professional relationship and make future interactions with your tenant much more problematic.
Lastly, pre-leasing can impair a property manager’s ability to screen and vet potential tenants properly. If you are not able to show the unit and have the tenant physically present for a rental showing, it can be harder to feel confident in their trustworthiness and ability to fulfill the terms of their lease. Ensuring that the home is market-ready with your existing renters and choosing the best time to view the property are other issues. This can result in a greater risk of property damage, late rent payments, or other rental issues afterward.
Drawbacks for Tenants
Pre-leasing has a variety of potential issues for tenants, as well. One of the most significant disadvantages is that pre-leasing can limit an incoming tenant’s ability to negotiate terms or amenities with the property owner, as they cannot physically see and discuss the unit throughout the lease signing process. This can also create confusion or discrepancies between what was promised and what is provided.
In addition, once a deposit is given, a pre-lease eliminates a tenant’s bargaining power and authority to change their plans. If their personal circumstances change or they seek a different rental option that better suits their needs or budget, they are not allowed to get their deposit back and may not be able to honor the lease they signed. These situations could easily lead to a vacant rental property, which is the very thing that you were hoping to avoid with the pre-lease, to begin with.
In short, pre-leasing involves some risk for both property owners and tenants. It’s advisable to weigh the possible positives against these negatives before deciding to pre-lease your rental property.
It also doesn’t hurt to seek the advice of local rental market experts, such as those at Real Property Management Magic Valley, on matters like these! Contact us online to learn more.
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