Rent concessions are common among landlords aiming to incentivize potential or existing tenants to rent their properties.
When utilized strategically, these temporary deals benefit property managers by minimizing vacancies. However, when used carelessly, concessions can work against landlords and hurt their bottom line.
So, what are rent concessions, exactly? What different types of concessions do landlords offer? When should you offer them, and when should you avoid them? Keep reading, and we’ll answer all these questions (and more) in this comprehensive post.
More eyes on your listings means more qualified renters.
A rent concession is a landlord’s incentive to attract potential tenants when advertising rental properties or keeping existing ones. When properly executed, they can help make rental properties more appealing to renters, especially when markets are competitive or occupancy rates are low.
Different types of concessions landlords may offer include:
While every landlord dreams of a 100% occupancy rate with zero turnover, vacancies are difficult to avoid. That’s why landlords and property managers sometimes need to get clever and utilize concessions.
Property owners can customize their offers to ensure they make sense for their property management operation.
Here are a few of the most common types of rent concessions in the rental industry today:
What’s not to love about a month or two of free rent?
Property owners often offer prospective tenants a month or two of free or reduced rent if they agree to sign a fixed-term lease. The allure of “living for free” in a rental property for a while before rent collection kicks in is often too tempting to pass up.
Rental application fees, tenant screening fees, processing fees, you name it; renters hate paying them. That’s why landlords looking to fill vacancies often waive some or all of the fees associated with applying for their properties.
Fewer fees often lead to more applicants, which should lead to fewer vacancies.
Renters often have trouble paying the hefty security deposits landlords require and may be discouraged from applying for properties that require a significant downpayment.
That’s why lowering a tenant’s security deposit (or waiving it altogether) could help incentivize more renters to apply for your rental properties. Remember that lower security deposits could increase your liability if a tenant damages your unit.
Renters with vehicles sometimes must pay hundreds of dollars a month to reserve a single parking space. These costs can be prohibitive for many tenants and discourage them from applying for certain rentals.
Property managers who use free or discounted parking as a rent concession could encourage more potential tenants to apply for their vacant units.
Tenants who are handy with tools can often negotiate lower rent in exchange for helping to renovate and improve the landlord’s property.
Though usually more complicated to execute than other rent concessions, offering renovation credits can benefit tenants and landlords in the long run.
Utility bills are a pesky expense that all renters could do without.
So, it should come as no surprise that landlords who offer to help tenants pay for utilities (or cover them entirely) usually have a much easier time filling their vacancies.
Landlords who offer tenants complimentary coffee at the cafe down the block, a free gym pass, access to a community coworking space, or similarly tempting perks usually have an easier time filling their vacancies.
Renters will always be hard-pressed to turn down free add-ons, even if they don’t require a significant financial contribution from the property owner.
Rent concessions can be a clever way to attract renters, so managers should understand when to offer them. Here are a few instances when they make sense:
If your rental market is ultra-competitive and real estate rivals are scooping up tenants while your units sit vacant, it’s probably a good time to consider rent concessions.
Offering enticing incentives to renters could be the secret ingredient that pushes tenants away from competitors and into your open arms (or vacant units).
It’s no secret: rental profits plummet or disappear when rental units sit vacant.
Landlords experiencing more vacancies than they’re financially comfortable with should consider using rent concessions to increase their occupancy rates. Though these incentives may cost landlords money in the short term, they could pay for themselves over the long run.
Landlords who try renting out their units in the offseason—think Anchorage in January or Phoenix in July—often have difficulty filling vacancies. Renters prefer moving during certain times of the year, which vary from market to market.
To spark interest among a smaller pool renters in the offseason, property managers should employ thoughtful rent concessions to make their properties more desirable than the rest.
No landlord wants to lose a renter who pays rent on time, respects their neighbors, and cares for their property.
Property managers worried about losing these “dream tenants” might consider waiving a month or two of rent, paying for utilities, or offering them a free gym pass to incentivize them to renew their leases.
There’s a lot to love about a properly executed rent concession. Here are a few of the top advantages they present for landlords:
Concessions exist to help landlords fill vacancies faster. Once vacancies are filled, property owners make more money, which allows them to continue growing their portfolios.
It’s not rocket science.
Landlords often must rent to suboptimal tenants when they have no other applicants to choose from. By incentivizing renters to apply for their properties, landlords can create a larger pool of potential renters and fill vacancies with tenants they feel good about.
Renters who feel their property managers value them and have cut them a deal are more likely to be satisfied with their living situation. Satisfied tenants lead to lower turnover rates, which results in fewer vacancies.
Churning through renters costs property managers time and money.
The headache of frequently re-listing rental properties and finding new tenants could be avoided by incentivizing them to stay via thoughtful rent concessions that raise retention rates.
Though they can often work in a landlord’s favor, there are a few potential downsides. Here they are:
Incentivizing tenants with concessions could raise a landlord’s expenses or lower their income. Either way, it’s essential to understand that the cost of acquiring new tenants or keeping old ones could reduce a landlord’s profits in the short term.
With that in mind, properly executed rent concessions should aim to increase a landlord’s profits over the long term.
Landlords offering rent concessions might signal to renters that their property isn’t in high demand or that they are desperate to fill a vacancy. This willingness to throw in freebies could attract applicants who fall short of a landlord’s typical standards.
If you give a mouse a cookie, he’ll ask for a glass of milk.
The same is true for tenants and rent concessions.
If a landlord offers their tenant a sweet deal, they will likely ask for more in the future. Think about it: if a landlord gives a tenant two months of free rent to sign an 18-month lease, what do you suppose they’ll expect when it comes time to renew their lease?
Properly executing rent concessions requires attention to detail. To ensure your offers and incentives run smoothly, keep the following advice in mind:
Landlords who comprehend the rental market in their area — vacancy rates, offseason statistics, competitor offerings, etc. — are more likely to construct successful rent concession offers that fill vacancies and keep occupancy rates high.
Knowing is half the battle, after all.
During strong rental markets, when demand for rentals is high, landlords may not need to offer incentives to attract tenants. On the other hand, offseason lulls and economic downturns may force landlords to ramp up their generous concessions to fill vacancies.
Landlords who understand demand, seasonality, and economic influence — and time their concessions accordingly — have a better chance of benefiting in the long run.
Property managers who allocate a certain amount of money towards concessions, track their returns, and analyze the statistics will better grasp the effectiveness of their campaign.
Managing rentals and maximizing income is a numbers game, and those who stay on top of their accounting and track concessions are more likely to win.
Cleverly designed rent concessions could help landlords attract their ideal applicants.
For example, landlords who want to rent to young professionals and remote workers could offer free access to a popular coworking space down the block. Knowing your target audience and marketing directly to them is Business 101.
Property managers who use rent concessions to incentivize renters should strongly consider using property management software to streamline their operations further.
TurboTenant, used by over 700,000 landlords and property managers, can help you:
Sign up for a free TurboTenant account today to minimize vacancies and maximize profits. With no credit card required, there is zero risk.
There are many scenarios in which tenants would receive rent concessions:
Though discounts and concessions are similar, there are a few key differences.
Discounts directly lower a tenant’s rent payment for a specific period or the entirety of their lease. For example, a landlord who offers tenants 15% off rent if they sign an 18-month lease offers a discount.
Concessions don’t usually directly lower a tenant’s rent payment but provide them value in some other way (usually temporary in nature). For example, a landlord who offers a tenant two months of free rent when they sign an 18-month lease is offering a concession.
If you’re an existing tenant searching for a rent concession, there are a few ways to increase your odds of landing one.
First, research similar properties in your neighborhood to see if they offer incentives to new or existing tenants. If so, you can use this as a bargaining chip.
Next, plan your upcoming conversation with the property manager. If your lease is expiring soon, consider asking your landlord for a concession as an incentive to stay. If you notice that many units within your apartment building are vacant, you can use this information to bolster your case.
Lastly, organize your thoughts and start negotiations. When you finally approach your landlord, lay out all the reasons you deserve one and await their response. If you’re lucky, they’ll be willing to incentivize you to stay.
No, but they could lower a landlord’s overall rental income, which, in turn, could lower their annual tax burden.
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