Lease Renewal Calculator Formula

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

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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

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