Last spring, one of my tenants asked for a second two-year renewal, and I didn’t say yes on the spot. I’ve walked through this decision more than 40 times across my 9 rental properties over 15 years, and a second renewal is a different call than a first one. A first renewal is almost automatic for me, it just confirms the tenant is who they appeared to be during move-in. By year four with the same tenant, I’m not just deciding whether to keep them for another 24 months, I’m deciding whether to leave money on the table while nearby units are renting for 8 to 12 percent more than mine. That’s why a second renewal gets a much closer look before I sign anything.
- Start With the Full Payment History, Not Just the Last Year
- Compare the Current Rent to the Market, Honestly
- Factor In Your Own Renovation and Exit Timeline
- Run the Vacancy Math Before You Assume a Discount Is a Loss
- Look at Communication and Unit Condition, Not Just the Numbers
- My Actual Rule for a Second Renewal
Start With the Full Payment History, Not Just the Last Year
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For a first renewal, I mostly look at the past 12 months. For a second renewal, I pull the entire 4-year file. I want to know how many times rent arrived after the 5th of the month, not just whether it eventually showed up. If I count 2 or 3 late payments across four years, that’s normal life, a delayed paycheck, a busy season. If I count 6 or more, even if every one was eventually paid, I treat that as a real signal, because it tells me how the next 24 months are likely to go, not the last 12. I also check whether the deposit was ever short after a repair charge, since that tells me more about cash flow habits than the rent ledger alone.
Compare the Current Rent to the Market, Honestly
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Before my last renewal decision, I checked three comparable 1LDK units within 800 meters of the building. My unit was renting at 78,000 yen; the comparables ranged from 83,000 to 87,000 yen. That’s a gap of roughly 8 percent. A single renewal cycle at the old rate costs me about 168,000 yen over 24 months compared to even the low end of that range. I don’t automatically raise rent to match the market, a stable tenant has real value, but I won’t renew a second time at the old number without at least discussing a modest increase, usually 3,000 to 5,000 yen a month. I frame it as a small adjustment tied to the renewal, not a surprise, and I give at least 60 days notice so it doesn’t feel like an ambush.
Factor In Your Own Renovation and Exit Timeline
A second renewal usually means committing to another 2 years with that unit untouched. If I’m planning a kitchen or bathroom renovation within that window, something I budget around 450,000 to 600,000 yen for on a typical 1LDK, locking in a long renewal can work against me. In one case I offered a 1-year renewal instead of the standard 2-year term specifically because I knew I wanted to renovate the unit in 14 months and raise the rent afterward. The tenant was fine with it once I explained the shorter term wasn’t about them personally. On another property where I had no renovation plans for at least 5 years, I went the opposite direction and offered a longer 3-year term to lock in stability and skip the paperwork cycle twice.
Run the Vacancy Math Before You Assume a Discount Is a Loss
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Landlords often treat any below-market renewal as pure loss, but I compare it against real vacancy costs. On my properties, an average vacancy runs about 6 weeks between tenants once you count listing time and move-in prep. That period typically costs me one month of lost rent, roughly 30,000 yen in cleaning and minor repairs, and often one month’s rent again as an agent placement fee. All together, that’s close to 190,000 yen for a single turnover. Compared to that, renewing a good tenant at 5,000 yen under market for 24 months, a 120,000 yen gap, is often still the cheaper choice, especially if the unit shows any wear that would need addressing before a new listing anyway. I’ve made the mistake before of pushing a rent increase too hard on a decent tenant, watched them leave, and then spent more on the vacancy than I would have gained in two years of higher rent.
Look at Communication and Unit Condition, Not Just the Numbers
Money isn’t the whole decision. Before my last three renewals, I did a walkthrough and checked a short list of things that matter more than people expect:
- Response time to maintenance requests, do they report leaks and issues within a day or two, or do small problems sit for weeks and turn into bigger repairs
- General unit condition, walls, floors, and fixtures showing normal wear versus damage that suggests neglect
- Noise or complaint history from neighbors, even if rent was always on time
- Willingness to allow access for inspections or minor repairs with reasonable notice
- Household changes, like an added occupant not on the original lease
A tenant who scores well here is worth more to me than the extra 5,000 yen a month I might squeeze from a stranger who could turn out to be difficult, and it’s cheaper than the 190,000 yen turnover cost I mentioned above.
My Actual Rule for a Second Renewal
After going through this enough times, I boiled it down to a simple test I apply before every second renewal conversation: if payment history is clean, the unit is in good shape, and the rent gap versus market is under 10 percent, I renew as-is or with a small increase. If any one of those fails clearly, I still renew, but I adjust the term length, the rent, or both, rather than just signing the same paperwork again out of habit. Writing this test down years ago is the only reason my renewal decisions are consistent across 9 properties instead of depending on my mood that week.
That’s the approach I use across all 9 of my properties, a second renewal isn’t a formality, it’s a fresh decision every single time.
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