RENT OWN SELL
Newyork
RENT OWN SELL
Newyork
Maintaining maximum occupancy and attracting new tenants is essential to becoming a successful landlord. But the fact remains that you cannot control the rental market. So, what should you do when you’re struggling to find new tenants? This is where rent concessions can help. Here’s everything you need to know before offering a rent concession.
1- What is Rent Concession
2- How its Work
3- Types of Rental Concessions
4- Advantages
5- Disadvantages
6- Choose the Right Season for a Rental Concession
Landlords can make adjustments in lease agreements to attract new or retain old tenants. This is the general gist of a rent concession. Lease agreements are usually set in writing and include details like the lease term, required security deposit amount, monthly rent amount, and any incentives offered. A rent concession is often a compromise in one of those provisions–it can be an item of value provided to the tenant or it might be a temporary incentive service.
Landlords don’t benefit financially from having vacant rental property. Apart from losing money on the rent, the landlord loses money on expenses like mortgage payments, utilities, and taxes. To avoid this level of cash drain, landlords strive to rent out vacant units as soon as possible.
There are generally two types of rental concessions: a concession can be a material item offered in exchange for signing a lease agreement, or a concession can be a temporary expense reduction. The most common rent concession is the payment of a tenant’s first month of rent. The landlord waives other charges associated with signing the lease. If there are special attractions nearby, like an amusement park or museum, a landlord may offer special passes for signing a lease agreement.
Some Additional Common Rental Concessions Include:
When landlords want to attract tenants quickly, they sometimes offer reduced rent for the lease term. If the advertised rent is $1,000/month, a tenant may only have to pay $900 for the lease term given the tenant doesn’t violate any part of the lease agreement. This concession could be voided if the tenant violates the lease agreement.
In some cases, a landlord will agree to waive the security deposit requirement or reduce the security deposit amount if the tenant moves in by a certain date.
Landlords can also offer to cover a tenant’s moving expenses as a rental concession. Either the landlord hires a moving company or just pays the one a tenant wants to hire.
A landlord may offer to make renovations if a tenant agrees to sign a lease. This concession works for the tenant who will get a made-over apartment. It also works well for landlords since the renovations will add value to their property.
Landlords often add a no-broker fee as a rental concession to attract more tenants. A broker’s commission can be expensive, so waiving it is always a plus.
If a rental property is in a building with paid communal spaces like a pool, tennis court, laundry, gym, parking space, or storage unit, the landlord may offer them for free.
The most significant benefit, of course, is that it helps landlords fill vacant units. The rate of occupancy increases quickly if the landlord decides to offer rental concessions. As a result, the vacancy rate will increase in that specific neighborhood overall because more tenants will be looking to rent in that area.
Having said all that, rent concessions can have some major drawbacks as well. It may be easy to offer these concessions to attract new tenants, but there could very well be pushback from tenants when the offer expires. This could result in the tenant choosing not to renew their lease for a new term, and then the cycle of trying to attract or hold on to tenants begins again.
Another serious risk comes when landlords offer a complimentary deposit as a rent concession. Although it’s rare, there’s a possibility that the tenant will abandon the property, cause extreme property damage, or pay the rent late and get evicted. Then there’s no money to cover the repairs needed.
You have to be insightful of market trends to ensure your rental concessions are successful. Summers are historically the busiest season for relocating, especially from June to August. During this time, people are moving more often, and that means competition is high among neighboring apartment buildings. It also means units can rent within just a few days or less since the market demand is high.
However, the good thing is rent concessions prove equally good to attract tenants in winter as well. As trends suggest that rentals tend to stay on the market longer in winter, you will certainly have the edge over your competitors if you decide to extend attractive offers as rent concessions.
A better way to deal with rental concessions is to add all concessions that will be revoked at the end of the lease term in the formal lease agreement. As a proactive measure, send tenants a notice reminding them that their concessions will be expiring a few months before their lease expires.
If you follow these strategies, rent concession will prove to be an excellent way to retain current tenants and avoid extended vacancies. Remember that vacancies may hurt your profits seriously. Be smart with your concessions, and you will be able to fill those vacancies in no time.
