Rental concessions are a useful tool landlords can use to attract and retain high-quality tenants, reducing vacancy and marketing costs.
Rental concessions are a useful tool for attracting and retaining high-quality tenants. But more than that, they help keep your units occupied in certain circumstances where:
However, you’ll want to make sure you only offer rental concessions in certain circumstances and not use it as a replacement for solid marketing and/or a good screening process.
In this article, we outline several common examples of rental concessions, the pros and cons, and how and when to use one.
A rental concession is a discount or special offer presented by a landlord or property manager to the tenant to encourage high-quality tenants to apply or stay longer. A rent concession can take a variety of forms from a discount on rent, cash back, or even improved amenities.
One of the most common rental concessions is offering a tenant a free month of rent.
There are a variety of ways that this can be applied, such as offering a prospect the last month of the rent free to fill a vacancy. Alternatively, when offering to renew a lease, you could offer the first month of the new lease agreement which might help persuade tenants on the fence to sign another year-long lease.
How and when you apply a rental concession depends on what you’re trying to achieve.
Offering a discount might be a better option if you would prefer not to give an entire month for free. It can still be an enticing lever and help fill vacancies fast or generate goodwill from existing tenants.
A rent reduction can be permanent or temporary.
For example, you might reduce the rent by a small amount to encourage a tenant to renew. Alternatively, you could negotiate a rent reduction for an otherwise great tenant who’s currently struggling financially so you can avoid having to go through an eviction you might reduce the rent by a small amount to encourage a tenant to renew.
Again the amount of the reduction you choose is up to you. Typically, this will be smaller than a discounted month because it covers more time.
Generally, a security deposit will equal a minimum of either one to two months’ rent, though some landlords have higher deposits. And with average rents at $1,900 across the US, a deposit could equal upwards of $3,800. This can be a serious barrier for potential tenants.
By offering a reduced security deposit you widen the potential market for your property. However, it may encourage lower-quality tenants to apply and will mean you have less money for damages should the tenant not work out.
Another common concession is to include free or discounted amenities as part of the rental package.
This can come in a variety of forms, for example, free parking, storage, laundry use, or Wi-Fi. We’ve also seen landlords negotiate with local businesses (such as a nearby gym or local daycare) to arrange a discount for their tenants.
For this concession, you’ll want to think about what would be most attractive to your ideal tenant.
The most obvious benefit of using concessions is that it can make your rentals more attractive to prospective tenants. This means you can reduce vacancy periods, which could be essential if your property’s in a competitive market.
For this to work, you have to make the deal too sweet for renters to pass up – so small concessions may not have the required effect.
The only thing better than finding a new tenant quickly is not having to find a new tenant at all. Renewing a lease with an existing tenant means you save on marketing and vacancy costs and reduce the stress and time input required.
If your tenants seem like they’re on the fence, a concession might be the thing that gets them to stay.
This is especially true if the concession is amenity based. Tenants might get used to having it and be a little put out when it ends.
This could lead to several unintended consequences such as soured relationships. It also might mean that in order to encourage them to renew the lease you’ll need to continue the concession.
There’s always the potential that you would have filled that vacancy even without the rental concession. If your property is good quality and there’s high demand but you sweeten the pot anyway, you could just be cutting unnecessarily into your profits.
Additionally, that money might be better spent elsewhere. For example, instead of offering a free month to attract tenants, you could make permanent upgrades to the property to make it more attractive and increase the rental value.
This can be difficult to gauge even with years of experience, but it’s a downside well worth considering. Concessions can be highly effective, but as the landlord, you need to be smart about what you offer and how you offer it to ensure you’re not just throwing money away.
Finding and managing tenants can be expensive and time-consuming. And there’s always the risk that the tenant you select will cause damage to the property, miss rent payments, and at worst need to be evicted. This is why it’s so valuable to encourage great tenants to stay.
Thankfully, with Landlord Studio you can streamline the process of securing and keeping the best tenant for your property.
Firstly, when searching for tenants having a streamlined tenant screening and selection process in place will help you make an informed decision quickly. With Landlord Studio you can centralize this process, collecting and efficiently pre-screening tenant applicants and easily running a comprehensive tenant screening report.
Once your tenant is moved in you want to make sure it’s as easy as possible for your tenants to pay their rent. Collect rent online with Landlord Studio to automate this entire process. Tenants can set up auto-pay, and review historical and upcoming payments via the tenant portal. This system is designed specifically for landlords, it’s fast, secure and easy to use. You control the rent amount, can block partial payments, and can even set up automated rent reminders.
Finally, streamline your property maintenance with our built-in work order management system. Create, prioritize and track maintenance jobs. And even allow your tenants to submit maintenance requests via the tenant portal (currently this is for ACH users only).