Even if you own a great property in a hot rental market, you might struggle to find and keep good tenants for any number of reasons, leaving you with bills to pay and stressful vacancies. Before you panic, there’s one solution to consider: rent concessions.
These incentives can take many forms, but they all share the same ultimate purpose of encouraging both new and existing tenants to sign a lease. If you’re tired of chasing down high-quality renters, rent concessions could be just what you need.
Before you start throwing out these benefits at random, though, you should know more about rent concessions. Keep reading to find out what rent concessions are, when you should and shouldn’t offer them, and best practices to help you protect your rental income stream.
What is a rent concession?
A rent concession is something landlords offer to incentivize new tenants to sign a lease and move into a rental property, or encourage existing tenants to re-sign a lease and continue living there. These perks are usually just temporary and last a few months.
Rent concessions can help if you’re struggling with high vacancy rates or a competitive market. However, no matter what benefits you provide to your tenants, rent concessions don’t usually come free for landlords—you’ll almost certainly have to pay for something worth offering.
Beyond the upfront costs of rent concessions, the practice can also have unforeseen long-term consequences for both landlords and tenants. You’ll need to do your research and carefully consider all factors before deciding whether to offer rent concessions.
Rent Concessions vs. Rent Discounts
Rent concessions can sometimes take the form of rent discounts, which lower the landlord’s asking rent. But while rent concessions are typically short-term, lasting just a month or so, rent discounts are typically for the duration of the lease agreement.
If you’re really in a bind and need someone in your rental at any cost, this can be a great strategy to keep your property occupied. Just don’t forget that lowering rent may cost you in the long term and significantly impact the overall profitability of your rental investment.
Why Landlords Offer Rent Concessions
Landlords often offer rent concessions to minimize tenant turnover costs and retain renters in a slow rental market or during the off-season. Rent concessions can also make rental properties stand out in high-supply markets, where tenants have numerous rental options.
In the long run, rent concessions can also help you keep the base rent higher (in contrast to a rent discount). As long as you provide a high-value concession at a low cost to you, this strategy can pay dividends over the lifetime of a lease agreement.
Common Types of Rent Concessions
Landlords can offer a wide variety of rent concessions, all of which will help attract paying tenants. You might want to consider benefits like:
Free or Discounted First Month’s Rent
If you’re trying to secure a new tenant, consider offering free or discounted rent for the first month of the new lease. This differs from discounting rent for the duration of the lease, so while you might lose money initially, you should earn it back later.
Tenants are always on the lookout for a bargain, so discounting rent temporarily can motivate renters who have affordability top of mind. Plus, it will help set your property apart on rental advertising platforms. Who would turn down lower rent these days?
Waived Admin or Application Fees
Another popular option for landlords seeking new tenants is waiving the administration and application fees, which will likely encourage more renters to apply in the first place. Instead of applicants paying for the costs of tenant screening or application processing, you’d cover these fees for them.
Since these costs add up quickly for tenants, especially those applying to multiple properties, you can motivate them to apply with minimal lost income on your end and immediate savings for them. It’ll also reduce hassle for renters and speed up the application process.
Moving Assistance
Offering moving assistance is a creative option for landlords looking for a potentially less expensive rent concession. The average cost of movers for a 2-bedroom home for 6 hours is $954. This is likely a less expensive option than offering a free month of rent, but is of high value to your potential tenants.
Unless you have Department of Transportation registration and a special moving permit, it’s best to leave moving tenants to the pros. While it may seem like a good investment to purchase a moving trailer and help your tenants move yourself, doing so could backfire. Professional movers have the appropriate gear, licenses, and insurance to protect themselves and the tenant’s belongings.
Free Parking or Storage
Free parking or storage can benefit both new and returning tenants. Rather than charging your typical fees for parking or additional storage space outside of the rental unit, you can offer renters a great deal and make up any lost income from the base rent.
Especially if you rent out a property in an area where parking and storage costs are at a premium, providing these services for free can help you easily attract and retain tenants. If you don’t have extra storage or parking spaces to spare, brainstorm budget-friendly alternatives.
Amenities & Other Perks
If it’s within your power to do so, offering your renters extra amenities is a no-brainer. “Amenities” could be anything from upgraded kitchen appliances to gift cards for local shops to free gym and pool access—you can get creative here.
Depending on the cost of installing or offering these amenities, you could turn a decent profit with minimal investment. If these amenities only cost a few hundred dollars over the lifetime of a lease, which could bring in tens of thousands, then you should give them a try.
Included or Discounted Utilities
Rather than relying on your tenants to set up and pay for utility services themselves, you can opt to cover all service costs or pay a specific amount for each bill. For example, you might agree to pay up to $100 toward utilities each month.
Utilities can add hundreds of dollars to a tenant’s base rent, so providing these services for free or cheaply will add significant value to your rental property. It can also reduce your tenants’ stress and strengthen your landlord-tenant relationship, making existing tenants less likely to move out.
When Rent Concessions Make Sense
As we’ve mentioned already, rent concessions are a good idea in a few different circumstances. You probably want to offer rent concessions if you’re in one of these situations:
Extended Vacancies are Hurting Your Bottom Line
If your rental property has sat empty for a while, with no end to the dry spell in sight, you’re probably actively losing money on mortgage and tax payments. Rent concessions can get paying tenants in quickly, so you can start recouping that lost income.
You Want to Get Ahead of Anticipated Seasonal Slowdowns
Let’s say you rent out a property in an area with a busy season and a slow season (think college towns or beach towns). Rent concessions can help you place or retain a tenant quickly, before the slow season hits and you struggle to find another renter.
You Want to Convince a Qualified Tenant to Live in Your Property
On the other hand, maybe a well-qualified tenant with solid income, great rental history, and a flawless background check has expressed interest, but they’re still on the fence about signing a lease. A rent concession might be just that extra nudge to get them to move in.
You Want to Retain a Reliable Long-Term Tenant
The same goes for a tenant you’ve had for over a year, who has a strong history of paying rent on time and doesn’t cause any trouble. Rent concessions can encourage them to stick around, saving you the hassles of vacancy and tenant turnover.
When Rent Concessions Create Risk
As appealing as they may sound, rent concessions won’t be the right move in every situation. You’ll want to avoid rent concessions if:
The Concession Hurts Your Bottom Line
Concessions can be great perks for your renters, but they have to be paid for by someone, and that someone is you. Don’t offer a rent concession that you can’t afford or will put too big a dent in your rental income.
The Concession Conflicts With State Law
Depending on your location, certain types of rent concessions can violate or conflict with state rental laws. For instance, local regulations might already require you to provide free parking for tenants, so you can’t offer that as a concession. Thoroughly research local landlord-tenant laws before you start.
The Concession Creates an Unequal Living Experience for Tenants
While you don’t have to offer the same concessions to all tenants, you may still have some unhappy tenants. Imagine the complaints if one of your renters notices that their neighbor has all-new appliances and they don’t. The headache might be more trouble than it’s worth.
The Tenant You’re Offering a Concession Has a Questionable Rental History
This goes without saying, but you probably don’t want to rent your property to a tenant with an iffy rental history in the first place. Rent concessions might also encourage them to seek to take advantage of your generosity and change the terms of the concession.
Tips for Properly Executing Rent Concessions
If you decide to offer rent concessions, make sure you do so the right way so you can make the most of these benefits.
Conduct Thorough Market Research Before Offering Any Concessions
Check other nearby rentals to make sure a rent concession is in your best interest. If you notice similar properties with extended vacancies or lower base rents, consider rent concessions. But if that’s not the case, a rent concession could be unnecessary.
You can also take this opportunity to see what, if any, benefits other landlords typically provide. That way, you can decide what type of concessions will best attract tenants—ideally, it should be something your competitors can’t or don’t offer.
Define the Concession in Clear, Non–Negotiable Terms
Even if a rent concession sounds self-explanatory, like free utilities, you have to make the terms exceedingly clear. How long will the concession last? Is it just one time, or for multiple months? And are there any limitations, such as maximum costs?
You should also emphasize to renters that they cannot attempt to renegotiate the terms later on. Being misleading or vague can lead to unhappy renters, or, even worse, tenants who may cause legal problems by claiming that you offered something you haven’t.
Put Every Rent Concession in Writing
In a similar vein, every rent concession you offer should always be in writing. This provides clarity to both parties regarding the concession terms and also serves as valuable proof if your renter attempts to dispute your original, agreed-upon terms.
You could include the rent concession information in your basic lease agreement, or tack it on as a signed addendum so you can keep all important documentation together. Either way, having a signature on the rent concession makes the agreement legally binding.
Track Concessions Properly During Accounting and Bookkeeping
If you’re not paying close attention, rent concessions can add a whole lot of confusion to your accounting and bookkeeping. Having concessions in writing will help alleviate this problem, but you should also track these costs as part of your typical financial processing.
Keep an eye on what rent concessions you’re offering, to whom, and how much the concessions cost so you can maintain profitability across your rental properties. Otherwise, you might end up losing money by continuing to provide a concession that doesn’t pay off.
The Final Word
In certain cases, offering rent concessions can be a valuable way for landlords to guarantee rental income and quickly and easily fill vacant properties. However, it’s important to note that rent concessions still carry risks for landlords, so they’re not always the right strategy.
Before you decide whether or not to offer rent concessions to your existing and new tenants, thoroughly research local laws and rental markets. And, of course, don’t forget to document all information related to your rent concessions for bookkeeping and legal purposes.
If you want to offer rent concessions, sign up for a free TurboTenant account to simplify property management and end extended vacancies.
FAQ: Rent Concessions
How can I ask for a rent concession?
First, research your local area to find comparable benefits offered by other landlords. Then, draft and send a written request to your landlord. Outline what kind of rent concession you want, why you want it, and highlight your value to your landlord as a high-quality tenant.
Do rent concessions need to be in writing?
Some places require landlords to put all rent concessions in writing, but regardless of local laws, having concessions in writing is vital. This makes the agreement legally binding for both parties, prevents disputes, and serves as proof of the terms of the concession.
Can rent concessions affect eviction rights?
In some cases, yes. Offering one-time discounted or free rent as a rent concession could complicate an eviction for nonpayment if the landlord did not document the concession’s terms and the tenant continues paying the discounted amount (or no rent at all).
Can I offer rent concessions to one tenant and not others?
Yes, you can offer rent concessions to one tenant and not others, but you must do so very carefully to avoid violating federal Fair Housing laws. Concessions must be given only in specific circumstances and cannot be based on characteristics such as race, marital status, or nationality.
