Rent concessions are a special offer from a landlord or property manager used to attract new tenants. These can include free rent, ongoing maintenance, or even property upgrades.
Types of Rent Concessions
There are several types of rent concessions used to draw in prospective tenants.
A Month of Free Rent
Offering free rent is the most exciting rent concession for tenants. While it seems like an expensive offer, a rent concession like this one can motivate tenants to act quickly. It is also often used to entice tenants to resign their lease.
You can offer a free month of rent throughout any month of the lease. Offering during the first month will benefit the tenant as they move in and have other costs. On the other hand, offering free rent during the last month will likely ensure the tenant stays throughout the lease.
Gift Cards
At first glance, a substantial gift card amount like $250 may seem like a lot. However, $250 is much cheaper than an entire month of rent. Gift cards can help a tenant purchase something for their space or groceries to get settled. You could also offer a gift card to a nice local restaurant as a way to welcome them to the area.
You can obviously opt to offer a smaller or larger gift card amount. However, you want to select an amount that will make potential tenants interested. A $5 Starbucks gift card is unlikely to make the impact you are after.
Similarly, you could offer an iPad, a laptop, or something else with a high perceived value.
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, this could backfire horribly. Professional movers have the appropriate gear, licenses, and insurance to protect themselves and the tenant’s belongings.
Yard Maintenance Services
Free or reduced yard maintenance services can be a win-win for the landlord and the tenant. Consistent yard maintenance services help free up the tenant’s time and keep your property looking great.
Check in with your local landscapers, they may be willing to offer a special deal especially if you have multiple rental properties.
Access to Amenities
Tenants can also be persuaded with free or reduced-price amenities. A gym, pool, access to laundry machines, or free Wi-Fi may be exactly what potential tenants are looking for to sign the dotted line. You can also offer specialty parking or access to a storage space.
If you live in an HOA community, don’t forget to advertise and offer the community amenities (just don’t forget to pay the fee).
Upgrades
A newly remodeled unit with new flooring, countertops, or nice appliances can make the space feel more valuable. Upgrades are also a great bargaining chip for good tenants you want to keep.
Why Offer Rent Concessions?
Offering rent concessions can make it feel like you are losing money and affecting your bottom line. But, attracting a good tenant can save you money in the long run. In fact, the average rent price across the US is $2,038, meaning that vacancies can really affect your business.
Quality long-term tenants will help you avoid spending time and money filling a vacancy or dealing with late or unpaid rent.
Everyone enjoys feeling like they got a good deal. Rent concessions go a long way to improve landlord-tenant relations. Satisfied tenants may opt to renew their lease agreement, no questions asked.
When to Offer Rent Concessions
Learning to be a competitive landlord takes some effort. Read the list below to determine if it’s time to offer rent concessions.
Avoid a Vacancy
The average U.S. renter only stays in the same rental for 27.5 months. Landlords regularly face rental house vacancies, and a rent concession can be a game changer. People are always searching for a discount and offering a rent concession can help you fill your vacancy more quickly.
Market Older units
Older properties may not get the same attention a newer or more upgraded property receives. Offering a rent concession will help your unit gain more attention. In fact, in a survey of over 10,000 renters, the most significant reason tenants were moving between rentals was that they were looking for/found a better deal.
Retain a Good Tenant
It is often said that a good tenant is worth their weight in gold. Retaining a good tenant will save you from added cleaning, advertising, tenant screening, and more.
If you are happy with your tenant, be proactive with a lease renewal. Offer a month of free rent for the month they renew or even a gift card.
Don’t be afraid to negotiate. Ask your tenant what would entice them to stay. If their request is realistic, make it work.
Avoid Seasonal Turnover
The time of year plays a big role in many locations.
If you live in an area with college students, you will likely see a rise in vacancies at the end of each semester. Offering a longer lease rent concession can help you maintain a lease through the slower months. For example, instead of a 12-month lease, offer a 14-month lease at a lower rate.
Fill a Luxury Unit
Tenants and potential tenants of luxury rentals are willing to spend more money and in turn, expect a certain level of service. Offering a rent concession is a great way to provide premium customer service. It is also a great way to form or maintain a positive relationship with tenants.
Establish Yourself or the Unit
Those new to the rental game or offering a new unit should also consider rent concessions to get a foot in the door. Offers like moving assistance won’t hurt your bottom line after the initial cost. It may also help you generate tenant leads down the line. There is never any harm in having a waitlist.
Documenting and Tracking Rent Concessions
Landlords must document any rent concessions offered. When signing the lease agreement, be sure to include the date(s) the rent concessions will take place. Arguing with a tenant later about the details of the offer can turn into a nightmare.
Tracking rent concessions allows you to identify which concessions worked well and which did not. You can also determine the cost associated with the rental concession and how that affected your bottom line. Check out this chart for an example:
| Unit | SQ FT | # of Beds | # of Baths | Monthly Expenses | Rent | Security Deposit | Rent Concession Type | Lease End Date | Lease Renewal |
| A | 1,200 | 3 | 2 | $1,000 | $2,000 | N/A | Deposit. Waived | 06/30/23 | Yes |
| B | 1,500 | 4 | 2 | $1,250 | $2,500 | $2,500 | N/A | 12/31/23 | No |
| C | 1,250 | 3 | 2.5 | $1,100 | $2,250 | $2,250 | 1-month rent | 08/31/23 | ? |
Drawbacks of Rent Concessions
Although there are great benefits to rent concessions, they do come with drawbacks.
Financial Loss
The cost of specific rent concessions may be too high for you to offer. For example, if you rent in a highly competitive area, you may already be offering a lower monthly rent. Offering a rent-based discount may cause big financial losses.
Landlords need to determine what the financial implications of each rent concession are and decide what is best for them. Landlords always want to be able to maintain a profit.
Tenant Expectation
Landlords could also face issues with rent concessions when it comes to the expectations of tenants or potential tenants.
A one-time offer of a rent concession may spread like wildfire. New potential tenants may contact you only to be disappointed that the offer is no longer valid. Current tenants may also expect continued rent concessions on a new lease.
Create a document with the terms and conditions of the rent concession. Have the tenant sign and date the copy, offer them a copy, and put it in their file. If you are clear about the timeline of the rent concession from the beginning, there may be fewer issues with tenant expectations in the future.
Security Deposit Fiasco
One popular rent concession is to waive or lower the security deposit. But, if the tenant exceeds normal wear and tear on the property there will not be money set aside to resolve the issue.
If you choose to waive the security deposit, be sure you have a backup plan should you need to make repairs at the end of the lease.
Potential Lower-Quality Tenants
Offering rent concessions may cause lower-quality tenants to apply. This increases your screening time and may end up costing you more money. Oftentimes, those searching for a discount or freebie aren’t the quality of a tenant you’re after. Landlords must keep their standards high and consistent to avoid landlord-tenant issues like late or unpaid rent.
What is a Concession Charge?
A concession charge, also known as a concession fee, is an amount listed in the lease agreement the tenant has to pay back should they not hold up their end of the bargain.
For example, if you offered a free month of rent for a 14-month lease and the tenant wanted to break their lease at 12 months, they would need to pay the early termination fee and the rent concession charge. Depending on your lease terms, this could cost up to 3 months of rent for the tenant.
Is a Rent Concession the Same as a Rent Abatement?
Although rent abatement does result in reduced or suspended payments, it is not the same as a rent concession. Information about rent abatement is usually written in the lease agreement. General reasons for a rent abatement include:
- Damage from a fire or natural disaster
- Significant repairs are needed to meet the warranty of habitability (broken water heater, lack of drinkable water, serious electricity problems)
- Federal or local government evacuation from the premises
