The method of pre-leasing an Eden Prairie rental property before it is ready for move-in can be a risky rental strategy. For some, pre-leasing is regarded as a tactic for property owners to avoid vacancies and to guarantee that they’ve got a new tenant lined up before the current one moves out. It appears to be a good option, but there are several pitfalls to pre-leasing that you need to understand before trying it out. Let’s take a closer look at how pre-leasing works and some of the typical difficulties 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 suitable for move-in. This may be due to the current tenants can’t seem to move out or because renovations or upgrades are still being made to the home. The property owner will entertain applications and possibly even sign a lease with a tenant before the move-in date.
The Disadvantages of Pre-leasing for Property Owners
One of the first expected downsides to pre-leasing is that the property owner may not be able to guarantee that the home will be open for move-in on the agreed-upon date. Delays in repairs and renovations or other issues may push back the actual move-in date, which can annoy the pre-leased tenant. This could also subject the property owner to legal action from the tenant if they cannot move in on the settled-upon date.
If there is major damage, the new renter may feel tricked about the property’s condition. This can cause disappointment early on, which could set an argumentative tone for their whole tenancy. This is particularly evident if the issue is intensified by broken promises or senseless wait times. In such circumstances, it’s common for a tenant to take legal action against an Eden Prairie property manager.
Moreover, things can get very challenging if the current tenant changes their mind about moving out – even after giving official notice. The property owner may have to address 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 certainly won’t be pleased to find that they will not be able to move into their new home as promised, and the current tenant may also disagree with attempts to get them to move out. That could easily destroy a previously positive professional relationship and make future interactions with your tenant much more challenging.
Ultimately, pre-leasing can eliminate a property manager’s ability to screen and vet potential tenants properly. If you cannot 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. Guaranteeing the home is market-ready with your existing renters and choosing the perfect opportunity to visit the home presents additional challenges. This may eventually result in a higher risk of property damage, late rent payments, or other rental issues.
Drawbacks for Tenants
Pre-leasing carries certain potential downsides for tenants, as well. Among the biggest downsides 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 during the lease signing process. This can also generate conflict or discrepancies between what was promised and what is provided.
In addition, once a deposit has been made, a pre-lease removes a tenant’s bargaining power and capacity to change their plans. If their life situations dictate or they find a different rental option that better suits their needs or budget, they will be unable to get their deposit back and may be unable to honor the lease they signed. Such conditions might easily result in a vacant rental property, which is the very thing you were likely trying to avoid with the pre-lease, to begin with.
In short, pre-leasing entails some risk for both property owners and tenants. It’s vital to weigh the potential benefits against these drawbacks before deciding to pre-lease your rental property.
It also doesn’t hurt to take the advice of local rental market experts, like those working with Real Property Management Viking, on matters like these! Contact us online to learn more.
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