Lease Renewal Calculator Formula

Understand the math behind the lease renewal calculator. Each variable explained with a worked example.

Use the Lease Renewal Calculator

Formulas Used

Net Gain from Renewal

renewal_net_gain = annual_gain_from_increase

Total Turnover Cost

turnover_total_cost = turnover_loss

New Monthly Rent

new_monthly_rent = new_rent

Months to Recover Turnover Cost

months_to_recover = (new_rent - current_rent) > 0 ? turnover_loss / (new_rent - current_rent) : 0

Variables

VariableDescriptionDefault
current_rentCurrent Monthly Rent(USD)1600
proposed_increase_pctProposed Increase(%)5
turnover_vacancy_monthsExpected Vacancy (Turnover)(months)1.5
turnover_costsTurnover Costs (Cleaning, Repairs, Leasing)(USD)3500
new_rentDerived value= current_rent * (1 + proposed_increase_pct / 100)calculated
annual_gain_from_increaseDerived value= (new_rent - current_rent) * 12calculated
turnover_lossDerived value= current_rent * turnover_vacancy_months + turnover_costscalculated

How It Works

Lease Renewal vs Turnover Analysis

Comparing the cost of retaining a tenant at increased rent versus finding a new tenant.

Renewal Gain

Annual Gain = (New Rent - Current Rent) x 12

Turnover Cost

Turnover Cost = Vacancy Months x Rent + Turnover Expenses

Decision Framework

  • If turnover cost exceeds annual gain, consider a smaller increase to retain the tenant
  • The longer it takes to recover turnover costs, the more valuable tenant retention becomes

    • Worked Example

    $1,600 rent with 5% increase proposed, expecting 1.5 months vacancy and $3,500 turnover costs if tenant leaves.

    current_rent = 1600proposed_increase_pct = 5turnover_vacancy_months = 1.5turnover_costs = 3500
    1. 01New rent: $1,600 x 1.05 = $1,680
    2. 02Annual gain from increase: ($1,680 - $1,600) x 12 = $960
    3. 03Turnover vacancy cost: $1,600 x 1.5 = $2,400
    4. 04Total turnover cost: $2,400 + $3,500 = $5,900
    5. 05Months to recover: $5,900 / $80 = 73.8 months
    6. 06The $960 annual gain does not justify risking $5,900 in turnover costs

    Frequently Asked Questions

    How much does tenant turnover really cost?

    Total turnover cost typically ranges from $2,000 to $8,000+ including vacancy loss, cleaning, painting, minor repairs, marketing, and leasing commissions. The actual cost depends on market and property condition.

    Should I always renew the lease?

    Not always. If the tenant causes problems, damages the property, or pays consistently late, the turnover cost may be worth paying. Also consider if market rent significantly exceeds current rent.

    What is a reasonable annual rent increase?

    Increases of 2-5% annually are typical and usually well-received by tenants. Increases above 10% significantly raise the risk of turnover. Always research comparable rents before deciding.

    Ready to run the numbers?

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