Guides
Lease Renewal vs New Tenant: Which Costs a Landlord Less?
Lease renewal vs new tenant comes down to hard dollars: turnover costs, vacancy loss and rent reset. Here is how US landlords compare both paths.
What to take away
- Renewing an existing tenant usually costs less than a reletting, mainly because vacancy loss and turnover labor disappear.
- The gap narrows when the sitting tenant pays well below market rent, since a new lease resets the number.
- Turnover cost per unit commonly lands in a range of $1,000 to $5,000, driven by make-ready work, cleaning, advertising and lost rent.
- A renewal at a modest increase often beats a reletting at full market once you subtract the weeks of vacancy.
- The deciding figure is net effective rent over twenty-four months, not headline rent.
What is being compared
Two paths compete for the same unit. One keeps the current household under a new or extended agreement. The other ends the tenancy and starts again with a stranger.
The arithmetic changes with the market. A tight market makes reletting easy and cheap. A soft market makes retention look like a bargain even at a discount.
Both paths sit inside landlord-tenant law, where renewal terms, notice periods and rent increases are defined by state statute and the lease itself. Cornell Law School's Legal Information Institute publishes an overview of lease terms and renewal concepts.
The criteria that matter
Four numbers decide most cases. Vacancy days, turnover spend, rent delta and the risk of a non-paying replacement.
Renewal
- Vacancy days
- 0 to 5, the unit rarely empties
- Turnover spend
- $150 to $400 for admin and a small concession
- Rent delta
- 0 to 10 percent below market
- Non-payment risk
- low, based on the record you hold
New tenant
- Vacancy days
- 21 to 45 in a balanced metro
- Turnover spend
- $1,000 to $5,000 for make-ready, cleaning and advertising
- Rent delta
- market rent at signing
- Non-payment risk
- unknown until month three
Renewal vs New Tenant Costs
Renewal
- Vacancy loss
- 0 to a few days
- Make-ready
- $0-$400
- Advertising
- None
- Rent achieved
- Modest increase
- Placement risk
- Low
New tenant
- Vacancy loss
- 2-6 weeks
- Make-ready
- $800-$3,000
- Advertising
- $50-$150
- Rent achieved
- Full market rent
- Placement risk
- Unknown
These figures are illustrative ranges drawn from typical US operating budgets, not survey results. Your own schedule of real estate and vendor pricing will move them.
Option by option
Renewal. You send a renewal offer at a rent you can defend, and the household signs. The unit never empties. Your costs are administrative: a notice, a lease amendment, maybe a small concession such as a waived parking fee or a fresh coat of paint.
New tenant. You serve notice or let the lease expire, then market the unit. You pay for a turn, you carry vacancy, and you screen applicants. The Wikipedia background on tenant screening page describes screening services and their typical costs. You also absorb the chance that the new household stops paying in month four.
A third path exists: a month-to-month holdover while you decide. It preserves optionality but caps your rent increase in some states and cities.
Where each one wins
Renewal wins when the unit is in good condition, the tenant pays on time, and market rent is within roughly 10 percent of the current figure. The saving is the avoided turn and the avoided vacancy.
Reletting wins when the gap between current and market rent is wide enough to cover a full turn plus several weeks of lost rent within the first year. In a fast-appreciating submarket, that can happen in one lease term.
Metro context matters. Phoenix has absorbed heavy new apartment supply in recent years, which softens rents and lengthens lease-up. Chicago's rent growth has been steadier, and its older housing stock makes turns more expensive. The same unit can justify opposite answers in those two markets.
Example
A two-bedroom in Phoenix rents for $1,450. Market rent is $1,600. Renewal costs $200 in admin and gains $50 a month, or $600 a year, for a net gain of $400.
Phoenix Example: Renewal vs Reletting
- $400Renewal net gain
- $3,960Reletting first-year loss
- $2,040Reletting gain at $1,900 rent
Reletting at $1,600 costs $2,200 in turn and advertising plus three weeks of vacancy at $160 a night, about $3,360. The first year nets a loss of roughly $3,960 against the old rent, before any rent gain.
Renewal wins clearly. Now raise market rent to $1,900. The first-year gain from reletting is about $2,040 after costs, and the second year is pure upside. The answer flips.
Break-even rule: add the turnover cost to the rent lost during the vacancy, then divide by the monthly rent gap between the old lease and the new one. The answer is the months needed to recover the switch.
A $2,500 turn plus two weeks of vacancy at $400 a week, against a $100 monthly gap, takes about 33 months. A $250 gap cuts that to about 13 months.
What none of them solve
Neither path fixes a bad fit. A household that damages the unit or pays late erases the savings from retention within a single season. A replacement chosen in a hurry does the same.
Both paths also depend on rules you do not control. Notice periods for rent increases, caps on renewal increases, and local ordinances all constrain the offer you can make. A state-by-state view of rent increase rules published by Landlord Lease Administration shows how much the ceiling moves between jurisdictions, even though the mechanics differ from US state law.
Neither option removes the administrative work of the lease lifecycle. Someone still has to track expirations, send offers on time, and document the file. A lease lifecycle decision framework helps only if staff are trained to use it.
