New Leases vs. Renewals: What’s More Important for Your Multifamily Business?

When it comes to managing occupancy in multifamily real estate, there’s always a lot of buzz around new leases. Marketing strategies, virtual tours, AI-driven bots, and tenant screening are common topics, but the discussion tends to overlook one crucial element: renewals.

While new leases are important—they’re the front door to your property—renewals are the back door. In fact, we’ve always operated on the premise that renewals make us more money than new leases. Why? The cost of a non-renewal can far exceed the cost of finding a new tenant. Let’s break it down.

The Hidden Cost of Non-Renewals

According to pre-COVID data from the National Apartment Association (NAA), the cost to renew a lease averages between $5,000 and $10,000 per unit. If you’re skeptical, think about the expenses involved in a tenant turnover: unit turnovers, marketing to find new tenants, vacancy loss, and the time your team spends screening and leasing. It adds up quickly.

Now, if you assume a 50% non-renewal rate, which is the industry standard, and use the lower end of the $5,000 figure, you could be losing $50,000 per year on a 20-unit property. That’s a hefty amount, and when you factor in the cap rate (say, 5%), the total loss in property value could amount to $1,000,000. Let that sink in. To offset that loss, you’d have to increase rents by $500 or more—something that can actually put your property at risk for higher vacancy rates.

Renewals: A Strategy for Stability

What does this mean for your strategy? Simply put, reducing turnover and focusing on renewals can be a far more profitable route than constantly chasing new tenants. Of course, raising rents is necessary to keep up with rising operating costs. But doing so in a way that doesn’t increase vacancy exposure is key. In our experience, strategically increasing rents while also retaining tenants can be the best of both worlds.

This approach isn’t a one-size-fits-all solution. We typically adjust our strategy seasonally, as demand fluctuates throughout the year. During certain seasons, we push rents to maximize revenue, while in others, we focus on maintaining tenant retention to minimize vacancy risk. It’s about balance—keeping your tenants happy and reducing turnover while still hitting your financial goals.

The Bottom Line

New leases are great, but the math shows that renewals are where the real money is made. The cost of non-renewals—combined with the time, effort, and expense involved in filling those vacancies—can have a significant impact on your bottom line. By prioritizing renewals, you can create a more stable, profitable investment.

At the end of the day, it’s not just about filling units; it’s about making informed decisions that keep your property profitable for years to come.

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