Offering Concessions to Protect Asking Prices
Are you finding it a little more difficult to sign good tenants at your asking price? It might be a trend.
Instead of responding by dropping your rent prices and creating havoc with your business, it’s wiser to have a collection of incentives or concessions to offer them during negotiations. New construction leasing pros know how effective they are.
Kick your own leasing success up a notch with these 12 best concessions below.
The Challenge will Increase in 2024
We know from statistics that landlords have a high reliance on rent prices for their income. So the question becomes; are you protecting that revenue stream?
In the last 20 months, rental property landlords have been getting a sizable asking price. However, with an economic slowdown against unaffordable prices, it may be harder to attract and hold onto good tenants. Many landlords will buckle, and drop their rent prices but then position themselves into a less desirable renter pool (completely price sensitive).
Using concessions and incentives as part of your negotiations in the moment, can be very effective in turning a money-losing situation into successful leasing outcomes.
Lowering rent prices sends your value proposition spiralling downward, disappoints current tenants, and forces you into more budget problems.
Rent Prices on a Solid Downward Trend
Rent prices will fall this winter, and in some cities the drop will be substantial. According to Zumper, in September, San Diego rents were down 6.1%, Jersey City down 5.4%, Orlando dropped by 4.3%, San Antonio declined 7%, and Durham fell 5.7%.
Core CPI, which excludes food and energy, fell to 4.1% year-on-year in September, but economic issues suggest continued inflation and high interest rates from the FED.
Will the FED press further until something big fails in the housing market? Food and energy prices are continuing elevated, thus leading to a high FED rate. Wages have dropped slightly and consumer spending is weakening which also means rent affordability issues for renters. They’ll want lower rent prices.
Roll Back Your Rents?
Those without a strategy and who roll with demand will likely just reduce their revenues. And with inflation not going away, it could put a crunch on many small biz landlords in 2024.
And if the expected fall in rates occurs in 2024, homeowners will be selling which could flood the market with new rentable condos, apartments and houses (speculation). That means increasing vacancies and rising churn/turnover costs for you in 2024/2025.
New Construction Rental Agents are Slick Negotiators
New rental condo construction salespeople are the experts in the concession strategy game. Landlords should be studying them for innovative tactics that might work in the current rental market.
It’s wise to take their perspective that they’re offering something special/valuable. They avoid price deterioration. There are lots of benefits/amenities to work with, and making changes to please the renter may be all that’s needed to get the unit leased at a high rent price.
You’ll need to calculate the full comparative dollar value delivered as part of your rent concession strategy.
8 Best Concessions to Negotiate
- Month Rent or Percentage off Rent Discount: It hurts to give up the funds, but it can help you get them signed to a longer-term lease, which they will likely agree to. Most rentals are long-term now because renters have few living options. It’s to your advantage. And current tenants won’t be as resentful as they would as hearing someone else got cheap rent.
- Discount for Extended Lease: a 2 year or 3-year lease is good for you, and cuts your risk of costly churn.
- Reduced Security Deposit: this is risky, yet a 20% discount can have a big on any renter because it sweetens the leasing deal (as a negotiation tactic to get them signed).
- Upgrades to the Rental Home: All properties require periodic renovations, so why not use them as an enticement to renters. This could also help you in the long term. Ideas include new appliances, new flooring or furniture.
- Appliance Upgrades: Appliances age and become energy-wasting, so why not use appliance replacement as an inducement to accept your asking rent.
- Free Services and Amenity Passes: Who doesn’t like free stuff? You can offer a free parking space, or free Wi-Fi. Additionally, if your property includes an amenity fee, this can also be comped for a year as a concession.
- Extra Storage Space: The self-storage sector continues to be hot, bolstered by strong population and job growth. Consider adding on-property storage units for the (many) things renters carry with them, and offering it to them as a bonus.
- Smart Home Technology: Throwing in smart appliances such as high-tech door locks, thermostats, tablet devices or smart home automation devices saves time, a great deal of hassle and money on the long run, and can be really appealing in a new lease.
- Eliminate Pet Fees: According to Statista, 70% of households in the nation own a pet. Justifiably however, landlords either don’t allow them or they ask for pet fees, pet rents and pet deposits that translate into prices of admission for both residents and their furry friends. Consider giving up on these extra charges.
- Move-in Allowances: Moving is stressful and expensive, so you might want to take some off the weight off your renter’s shoulders by providing them free moving truck rental services. You could also save them some money by reimbursing broker’s fee costs.
- Free Cable, Internet, Utilities: practical benefits with certain value, which gets their minds off of the price.
- Free 65 inch HD television: Not everyone has these big TVs and they’re not as expensive as many believe. With a cold winter ahead, many tenants are looking ahead at what they’ll be doing with their evening and leisure time.
The more concessions and incentives you’ve got in your leasing quiver, the more likely you’ll win the lease.
Discover more on how to set the best rent price and keep tenants leased.
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