Offering a rent concession can be beneficial for property owners and landlords. However, the concept can be confusing or intimidating for new landlords. What is a rent concession, and how is it beneficial? Moreover, when should a landlord offer it?
What Is a Rent Concession?
A rent concession or lease concession is a kind of agreement between a landlord and tenant. The concession rental allows the tenant to reduce expenses or waive specific rental agreement terms. Often, a rent concession refers to a rent reduction, but it also comes in many forms. Nonetheless, any rent concession offers incentives to the tenant.
This may seem counterintuitive for landlords who want to earn money. However, rent concessions provide value as they attract tenants to the landlord’s property. This gives landlords an edge in a competitive rental market. Moreover, these incentives can increase the landlord’s contract renewals, allowing them to retain good tenants.
What Are the Types of Rent Concessions?
There are several types of rental concessions available to landlords. Here are some common types a landlord can use to incentivize contract finalization and renewal.
1. Free Rent for a Month
The most common one-time concession rent incentive landlords offer is a month of free rent to the would-be tenant. This entices the tenant to move in faster and begin their rent-free period. It pushes them to sign a contract and is especially effective for landlords who need to quickly fill in vacancies.
2. Rent Reduction
The cost of apartment rent has recently been growing in Florida. As such, a monthly rent concession in the form of a rent reduction can be especially alluring for many tenants. This encourages potential tenants with financial struggles to consider the landlord’s property. It is also attractive to tenants looking for a long-term living space.
3. Security Deposit Discount
Offering a discount on the security deposit is one of the best apartment concession options out there. It lifts some of the renter’s financial obligations as security deposits are paid upfront. Some landlords even waive the security deposit to entice tenants in competitive markets.
4. Moving Expenses Assistance
Moving can cost money, and tenants know this very well. That’s why some landlords offer a rent concession by paying for part of the renter’s moving costs. Some landlords offer to shoulder just the cost of getting a moving truck. Meanwhile, others may even hire professional movers to entice the tenant.
5. Rental Upgrades
Landlords may provide the tenant with rental property upgrades to encourage them to sign or renew the contract. This upgrade could be any improvement or addition to the property in question. For instance, the landlord may provide upgraded appliances to the tenant or add a built-in laundry. Some may even offer full renovations for the bathroom or kitchen.
6. Free Access to Amenities
Many rental properties exist in condominiums or homeowners associations with amenities like pools, gyms, and community centers. Landlords who wish to attract tenants may offer free amenity access in their rent concession agreement. This can entice renters who want more benefits than just finding a decent living space.
7. Broker’s Fee Payment
The broker’s fee can be a big financial burden for many tenants. Landlords who want to attract renters can offer to pay for this fee as part of a rent concession. It’s especially effective for expensive rental markets.
8. Waived Pet Fees
Tenants with pets are often unwilling to let go of their furry friends, but pets often pose a liability risk for many landlords. That’s why some landlords charge a pet fee instead of banning pets altogether. However, this can be a deterrent for many renters who already have heavy financial burdens. If the landlord has trouble finding tenants, they may waive the pet fees to attract renters.
9. Free Utilities
Some landlords may offer free utilities as a rent concession. To entice tenants, they may pay for the tenant’s cable TV, water, or internet. Of course, this may be a difficult concession as the cost may depend on the usage. Thus, some landlords offer this for a limited time only.
10. Miscellaneous Benefits
Landlords aren’t limited to offering large discounts and bonuses. They can also provide minor benefits like offering gift cards to local restaurants, throwing in a gym membership, or paying for a home cleaning service. These may be smaller than concessions but can draw potential tenants in.
When Should Landlords Offer a Rent Concession?
Just because a landlord wants to find tenants doesn’t mean they should immediately offer a rent concession. Landlords should be prudent and consider various factors. For example, if the landlord has several potential tenants lined up for the property, they may not need to offer a concession. Also, offering a rent concession may not be wise when the demand for rental properties is high and the supply is low. Tenants may eventually line up for the landlord’s property as they run out of options.
Landlords should also remember that offering a rent concession affects their rental income. Thus, they may face obstacles when buying or refinancing their properties. Lenders will look at the landlord’s rental income and rent concessions — even if they’re temporary.
That said, when should landlords provide a rent concession? Here are some instances wherein it may be appropriate to offer these incentives:
- The landlord has a prolonged vacancy that cannot be filled
- An existing tenant is about to move, and the landlord cannot find a potential renter
- The landlord is renting a large unit or house for the first time
- Rental properties are in low demand, and there are more rental units available than there are interested tenants
- The current tenant may be a responsible person, and the landlord wants them to renew their lease contract
Enticing Potential Renters
Offering a rent concession is a great way to entice potential renters. Landlords may temporarily lower their rental income, but it may be more advantageous for them in the long term. Rent concessions are especially useful in competitive markets when there are too many rental properties and insufficient tenants to fill them.
Do you need help managing your rental property and determining if and when you should offer rent concessions? Finding a real estate agent or property management company may help. Look through our online directory to find a reliable one near you!
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