To some landlords, it might be hard to understand why you would want to give tenants discounts, free rent coverage, and other rent concessions. What is a monthly rent concession, after all? One would think it might be tearing your profit to pieces [and not in a good way].
In reality, a rent concession is a discount that builds your long-term profit. Even if rent concessions leave you with less incoming funds for a short period, you can acquire long-term tenants, a good reputation as a landlord, and lease renewals through these agreements.
Are you missing out by not offering rent concessions to your tenants and applicants? Find out more about rent concessions today to determine if this practice should be rotated into your typical business plans.
A Table Of Contents On Rent Concession
Rent concession is, in theory, as simple as giving a discount to a tenant. However, these tenant credits come in many forms. Which ones might bring a significant boost to your business? Follow along with us today:
- What Is A Rent Concession?
- How Do Landlords Benefit From Rent Concessions?
- What Rent Concession Types Are There?
- How To Offer Rent Concessions To Tenants
- FAQs: What Is A Rent Concession?
- Concession For Rent: An Alternative Option
What Is A Rent Concession?
Any discount or adjustment made to rent, a security deposit fee, or other fees paid by the tenant to their landlord is known as a rent concession. You can give these discounts to tenants monthly, at the start of the lease, or any other point you feel is appropriate. Rent concessions are sometimes called tenant credits or rent discounts.
Experienced landlords have found that using rent concessions is a great way to show potential and returning tenants that you are committed to making your tenant-landlord relationship a solid, mutually beneficial one. After all, who doesn’t enjoy a deal?
As such, rent concessions can be recurring reductions, long-term reductions, or just one-time discounts. The goal of rent concessions remains the same: Landlords using rent concessions want to convince tenants or rental applicants to take action. Oh, and that the landlords would love for them to stay, which I feel like is a pretty big compliment.
Usually, you’ll want to use this type of discount when trying to sign or renew a lease, but there are other situations where these adjustments can come in handy.
The terms of the standard lease agreement still apply whenever concessions are used. The security deposit, monthly rent, and any other fees will apply. Any monetary concession is a temporary reduction to one of these amounts, which should be clarified when offered to the tenant.
How Do Landlords Benefit From Rent Concessions?
Landlords without experience in offering these reductions might not understand the appeal. After all, it isn’t often in the rental business that you want to offer to make less money. However, there are some major benefits to using rent concessions in the right situation.
Stand Out From The Competition
Is your area full of properties without enough renters to go around? Landlords having trouble filling vacancies at their price point may want to find a way to stand out from other vacant rentals. Offering and advertising rent concessions, such as a free first month’s rent, is a great way to do just that.
Consider what renters in your area want, and find a way to advertise that concession when marketing your property. Whether you offer upgraded amenities, discounted utilities, or a free month’s rent, you’ll likely receive considerably more applications using this technique.
Increase Your Renewals
Are your rental turnover numbers too high?
Landlords constantly working to fill vacancies and find new tenants need to improve their turnover rate. By convincing more tenants to renew their leases, you will spend less time filling vacancies and more time making money. How do rent concessions come into play?
Offering tenants rent concessions alongside their lease renewals is a great way to provide extra incentive to stick around. Giving rent discounts, upgrading appliances, refreshing paint jobs, and other simple concession offers can be a great negotiating tool for on-the-fence renewals.
Investing in reliable tenants is a great way to secure your long-term profitability, so don’t feel like this discount is a loss.
Rent Concession Types
You’ve already learned about a few types of rent concessions—what else is there to consider when using these discounts for the first time?
As a landlord, be creative about what you offer tenants. While free rent is always exciting for the tenant, it may not be a practical choice for your situation. There are many other types of concessions to provide to applicants and tenants. Here are a few of the most popular.
- Free month of rent
- Reimbursed moving costs
- Temporary rent reduction
- Reduced security deposit or pet deposit
- Free or discounted access to amenities (parking, laundry, etc.)
- Upgraded appliances
- Improved flooring, windows, etc.
- Waived pet fees
- Free utilities, cable, or internet
These are just some types of rent concessions that experienced landlords have found success with. Ultimately, it’s between you and your tenant to determine what type of rent concession will get them to sign on. Get creative and find the best solution for your business.
How To Offer Concessions To Tenants
Have you decided to give rent concessions a try?
You’ll want to start offering these concessions at the point in your rental flow that is suffering from problems. Filling vacancies faster can happen with discounted application fees, the first month’s rent, or security deposits. Keeping tenants around longer may require remodels, improvements, discounted rent, or free access to amenities.
Work with the applicant or tenant to negotiate a deal that works for both parties. After all, you want to show that you are a reasonable and reliable landlord. What better way than to communicate with your tenant throughout this process?
Be sure to document your offer in its entirety. Rather than adjusting the lease agreement’s standard rent, make sure to add the concessions clearly with start and end dates. You can always add extensions to this later, but you cannot remove something once it is added to the agreement. Don’t forget, you can get a rent concession addendum as well. Here’s a solid draft to get you started.
Documenting is always important in the rental business. You don’t want an agreement to boil down to a back-and-forth argument. Keep everything on file and in your financial records. Even if you disagree about what was agreed upon, your records will show what really happened.
It All Starts With The Right Tenants
Rent concessions are a great way to get tenants to sign on at your property, but you want to ensure that you’re bringing in tenants who are a good fit. Before you start offering concessions to sign leases as fast as possible, set up a high-quality tenant screening process.
Tenant screening is key to success as a landlord. If you find it challenging to get through the screening process or aren’t sure how to handle background checks, we’re here to help.
RentPrep offers a wide variety of tenant screening packages that give you access to every facet of tenant background checks, credit reports, and more that you might need to screen an applicant thoroughly. Don’t let any more unreliable tenants slip through the cracks—improve your tenant screening with RentPrep today.
FAQs: What Is A Rent Concession?
Let’s take a look at some of the top questions landlords asked about offer concessions for a rental property.
What does concession mean in rent lingo?
In the rental industry, a concession is typically used to refer to a discount or adjustment given to a tenant by their landlord or property manager. The discount or adjustment could apply to their rent, deposit, pet fees, or another aspect of their regular payment to their landlord.
Concession is a word used in many scenarios, so it can be confusing to know what it means when it comes to rentals. Typically, this word is used when something is negotiated or given to another party to secure a deal.
This is often how experienced landlords use rent concessions as well. They offer these “bonuses” to tenants to secure a lease renewal, a first-time lease, or even an early departure.
When should a landlord not use rental concessions?
There’s no doubt there are considerable benefits to using rent concessions, but that’s only true when the discounts are used in the right situations. Offering rent concessions will reduce your immediate profits. If your business doesn’t have room for this type of flexible cash flow, it’s not the right time to use rent concessions.
Additionally, consider your future plans. If you plan to take out loans for the property, your assets and total income from the property will be considered. Concessions given will reduce the overall income shown to lenders, so you want to be sure that this action won’t impact your business plans.
If this could be a problem for your business, focus on rent concessions such as renovations, updated appliances, or other non-monetary adjustments.
Why do landlords give free rent periods?
The reason most landlords offer a free rental period to potential tenants is simple: they want someone to move in! If you’re trying to fill vacancies and increase your long-term profits, offering a monthly rent concession each year can be a great way to do so.
While it may feel like you’re missing out on cash initially, you’ve secured income for the entire tenancy period with this deal. This solution isn’t a good fit in every situation, but it can be a great way to seal the deal when vacancies are high and interest is low.
What is an example of a rent concession?
The most common rent concession you may use is a free month. By waiving the first month’s rent for new tenants and advertising as such, you can attract more applicants, find the best fit, and lock in the lease. The attraction of discounted rent is hard for renters to pass up. In return, you secure long-term profits.
Another common type of rent concession is done toward the end of a tenancy rather than at the beginning. If a landlord would like a tenant to move out early but doesn’t have a legal recourse to demand this, they may offer a tenant free rent for their last month if they agree to move out early. Similar to cash for keys, this is a way landlords free up their properties quickly.
What does Look and Lease (L&L) mean in the rental industry?
Another discount type considered a rent concession is a “Look and Lease” adjustment. Landlords and property managers looking to fill rentals as quickly as possible will use this method to lock in leases rapidly.
In a “Look and Lease” special, the applicant receives a discount for leasing the apartment the day they view it. This saves you time and money on the property management side of things while also giving tenants a bonus for being decisive.
When using this method, it’s essential that landlords pre-screen tenants or only accept the agreement contingent upon tenant screening results. Locking in quickly with a bad tenant will only ruin your long-term profits, so don’t make that mistake if you decide to use this type of concession.
Does rent go up after a rent concession?
Regardless of whether or not you give a tenant some type of rent concession, the rent during the lease period must still be the amount stated in the agreement. You cannot raise the rent after discounting the first month; you can only charge the total amount agreed upon by both parties when signing the lease.
You are permitted to raise the rent later when renewing the lease or according to the terms of your lease agreement. Remember that you cannot raise the rent because the concession period is over without previously agreeing to the total rent amount.
Will You Offer Rental Concessions?
Not all landlords will succeed with rent concessions, nor will all landlords want to try this tool. However, don’t write it off just because it isn’t something you’re familiar with. Now that you know more about how monthly rent concessions work, give it a try.
Remember, there are many opportunities to test out rent concessions:
- Renewing a lease with a current tenant
- Attracting new tenants
- Winning over applicants unsure about signing a lease
- Encouraging a tenant to end their tenancy early
- Improve tenant-landlord relations
If your rental business could improve in any of these areas, give this alternative option a try. Rent concessions might be the solution that you’ve been looking for!