Rental vacancies can be disastrous for a property manager’s bottom line. Rent concessions, incentives, and extra amenities can help to entice qualified tenants and prevent vacancies. If you are having trouble finding a tenant for your rental property or want to increase your retention rate, it may be a good idea to consider offering rent concessions.
WHAT ARE RENT CONCESSIONS?
Rent concessions (also known as a tenant credit, rent discount, or write-off) are discounts or adjustments made to the regular rental rate or security deposit fee. The landlord or property manager makes these temporary or long-term reductions in order to entice renters through temporary incentives, or in exchange for specific services carried out by the tenant.
TYPES OF CONCESSIONS:
Incentive concessions are offered to encourage current tenants to renew the lease, but may also be offered to prospective tenants as a lease signing bonus. A landlord may choose to be creative, offering nearby theme park tickets, new TVs, or other appliances, but there are a few common rent concessions to consider as well.
- Free Month’s Rent: Every applicant gets excited about the possibility of a free month’s rent. This can be a rather large discount, but the benefits of finding a great tenant can outweigh the costs. This is also a common way to incentivize lease renewal, which promotes lease retention. Landlords might decide to offer the first month of the lease for free, which can help tenants who have exhausted their budget with moving expenses and security deposit fees. Alternatively, the free month can be outlined as the last month on the lease contract, which can hedge against the tenant moving out early. For a year-long lease, the tenant would pay the normal rental rate for the first eleven months and get a free twelfth month.
- Moving Assistance: Moving is stressful. If you offer new tenants some help with moving costs, they may really appreciate it. You could offer to reimburse the costs of broker’s fees, movers, moving trucks, or a storage unit as a rent concession.
- Rent Reduction: One temporary concession to consider is reduced rent. This can be offered for the first 3 months of a new rental, for example, or can be offered as a long-term reduction. Long-term rent reductions are common concessions for tenants who sign a multi-year lease agreement or are renewing an existing lease. These long-term concessions are helpful for landlords who want to avoid the hassles of annual tenant turnover.
- Security Deposit Reduction: Renters face many expenses when moving, and they may be more inclined to sign a lease on a unit that offers a reduced security deposit. A smaller security deposit requirement can entice more potential tenants. Landlords should remain cautious, however — there will be less to pull from if the renter damages the property during their tenancy. Some landlords choose to offer the option of getting security deposit insurance to offset this issue.
- Free or Discounted Amenities: Landlords may choose to offer free or discounted amenities like in-property storage units, laundry areas, WiFi, or preferred parking areas as a rent concession. For rental properties that do not have these amenities in-house, landlords might offer to partially or fully cover something like local gym memberships or TV streaming subscriptions.