What is a Rent Concession?
As a landlord, you want to keep your rental properties occupied as much as possible. However, sometimes, renting out your property isn't as simple as it seems. The rental market is competitive, so you need to offer something that sets you apart from the rest.
In some cases, a rent concession might be an attractive option that meets the needs of both parties involved – but how do you know when this could (or should) be implemented? This comprehensive guide will help answer all your questions about rent concessions so that you can enter any negotiations with confidence.
What is Rent Concession?
A rent concession is an agreement between a landlord and tenant to reduce or waive certain terms of a rental agreement. It typically refers to a reduction in rent, but it can also include waiving fees, offering additional incentives such as free services, or providing items of value to the tenant.
Rent concessions are often used by landlords as a way to attract tenants and make their property more marketable. For example, if the market rate for rent in an area is high, a landlord may offer a rent concession in order to entice potential tenants. Rent concessions can also be used when there is high demand for rental properties and landlords are competing for prospective tenants.
Types of Rent Concessions
Let’s explore the different types of rent concessions that you can offer to help you attract more tenants to your property.
1. Offering a Free Month's Rent
One of the most common types of rent concession is offering a free month's rent. This type of concession gives tenants an incentive to move in quickly and start their rent-free period right away. Free rent is particularly effective when you're trying to fill a vacancy fast.
2. A Reduction in Rent
Another type of rent concession is offering reduced rent. This is particularly beneficial for tenants who may be struggling financially or who are looking for a more affordable rental property. Offering reduced rent can also help you attract longer-term tenants who are looking for a stable living situation.
3. Security Deposit Reduction
Security deposits can be a significant financial burden for some tenants, particularly those who may be moving on short notice. To make your rental property more attractive to potential tenants, consider offering a reduced security deposit or even waiving the security deposit altogether.
4. Moving Cost Assistance
Moving costs can add up quickly for tenants, and offering to help with these costs can be a strong incentive for someone to consider your rental property. Consider offering to cover the cost of a moving truck or even hiring professional movers for your tenants.
5. Property Upgrades
Upgrades to the rental property can be a significant draw for potential tenants. Consider upgrading appliances, adding in-unit laundry, or even renovating the kitchen or bathroom to make your rental property more attractive.
6. Free Amenity Access
Offering free access to amenities like a gym, pool, or community center can be a strong incentive for potential tenants. This type of concession is particularly effective for larger rental properties or those located in luxury neighborhoods.
7. Pay the Broker's Fee
Broker's fees can be a significant financial burden for tenants, particularly in high-cost rental markets. Offering to cover the cost of the broker's fee can make your rental property more attractive to potential tenants.
Consider offering tenants a gift card to a local restaurant, a home-cleaning service, or even a gym membership. These types of concessions can be a strong draw for busy professionals or those looking for a more luxurious living situation.
When Should Landlords Offer Rent Concessions?
You should offer rent concessions when you have a prolonged vacancy and cannot find a tenant when an existing tenant's lease is up for renewal, or if you are renting out a large property for the first time.
It is also necessary to note that rent concessions are also typically used when there are more rental units available than interested tenants in an area. By offering concessions, you can entice current tenants to renew their leases. In addition, you can attract new renters who benefit from concession savings. As we mentioned before, rent concessions can also be structured in various ways to meet the needs of both landlords and tenants. This means you have a lot of flexibility in utilizing rent concessions to your advantage.
Tips for Offering Rent Concessions
Here we've compiled some tips that will help you use rent concessions to your advantage.
Tip # 1: Research Competitors in Your Areas
Before offering rent concessions, you want to know what your competitors are already offering. Check out the rental prices of other properties in the area and determine how your price compares. See what kinds of discounts or concessions they offer to their tenants. Doing so will provide you with a baseline understanding of what you can offer.
Tip # 2: Evaluate Tenant Needs
By understanding tenant needs, you can offer concessions that will genuinely help them. For instance, if you are renting to students, offering a discount during exam periods could be an attractive offering to them. In contrast, working professionals might require flexible rent payments that don't interfere with their payment schedules. By understanding tenant needs, you can create rent solutions that are useful for them.
Tip # 3: Find the Right Time
The timing of your rent concessions is critical. For example, offering discounts or concessions during lease renewal dates is timely since tenants are already in decision-making mode. Advertise the discount or concession a couple of months before the lease renewal date. This way, tenants will have ample time to decide if they intend to stay or leave.
Tip # 4: Be Transparent
Any rent concession agreement should have your terms and conditions clearly expressed. Make sure the agreement is in writing; this will protect you and your tenants from any future misunderstandings. Your tenants should know the amount of the concession and for what period it lasts. This way, tenants know what they stand to gain, and you have a well-understood and transparent rental process.
Tip # 5: Keep an Eye on Your Bottom Line
Rent concessions shouldn’t put a significant dent in your profit margin. Consider only providing concessions to financial-sound tenants. Also, ensure the length of rent concessions for new tenants is not too long, so your revenues are not significantly impacted. Most importantly, make sure to track the cost and returns of concessions so you can evaluate when to end it.
Rent concessions can be a tricky concept to understand, especially as a landlord. However, understanding what rent concessions are and when they can be given is essential knowledge – especially since they can significantly impact your cash flow.
Thankfully, this guide has given you all the necessary information to help you make educated decisions when it comes to granting any rent concessions. Keep in mind that grants and exemptions still need to remain within legal boundaries and should align with both fair housing practices and applicable laws. By understanding the rationales for rent concessions, staying organized, helping tenants where applicable, being aware of any restrictions or limits in place, and providing an agreement in writing prior to the enactment of rent concessions - as a landlord, you will have the tools and knowledge you need to ensure your decisions are ethical, profitable and successful.
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