What To Do When Your Tenant Wants To Negotiate Lower Rent

Updated November 2020

New landlords don’t often prepare for this occurrence, but sometimes, tenants will ask to lower the rent. It happens more often than you think — the lease expires in the next month or two and an excellent tenant leaves you a message about possibly renewing.

However, they want to negotiate a lower rent.

If you’ve learned anything about a good landlord/tenant relationship, it’s important for both parties to get what they want out of the arrangement.

It could actually be worth your while to negotiate a lower rent with your tenant so both of you are satisfied. However, that doesn’t mean you should immediately agree to their requested terms. After all, you need to run your business efficiently and profitably.

Before agreeing to any new terms, you need to make a few important determinations. Today, you can learn more about negotiating lower rent, offering alternatives, and how you can decide what is right for your rental business.

Table Of Contents For Tenant Negotiating A Lower Rent 

Tenant Wants To Negotiate Lower Rent: What’s Next?

Tenant Wants To Negotiate Lower Rent: What’s Next?When a tenant approaches you asking for a rent reduction, you might be surprised and unsure of how to proceed. After all, why is the tenant asking for a price reduction at all?

Most tenants approach a landlord to talk about rent reduction because they want to stay in the unit but feel like there might be better deals elsewhere. Knowing that there is often some wiggle room in what landlords charge for rent, a smart tenant can try to negotiate a rent reduction in exchange for renewing the lease agreement.

Pros And Cons

While there are pros and cons to this approach, if you have a really good tenant in place, it may be worth your while to lower the rent to keep them. It may be more financially beneficial in the long run because a good tenant makes you money while bad tenants cost you money.

In fact, the idea of retaining a tenant in a hard-to-rent area may be appealing enough for some landlords to say yes to this type of request almost immediately. Still, it is never good to act too quickly when it comes to this type of decision.

On the flip side, you might be able to quickly fill the vacancy when the tenant moves out and make the full rent amount, if not more, by standing firm on your price. That determination will need to be made based on the going market rental rate, the typical vacancy period, and what your financial situation is.

When a tenant comes to you asking to negotiate about the rent price, do not immediately reject their request without taking some time to consider it. At the very least, you need to prepare information about why their request cannot be approved. If you act too rashly, you might ruin your landlord-tenant relationship.

How To Negotiate Rent Price With A Tenant

After a tenant approached you about lowering rental price, you’ll need to determine what the right next steps are for your situation:

  • Does it make sense to lower rent?
  • What are the tenants wants?
  • Can you find a tenant willing to pay the current price instead?

Asking yourself these questions, and more, will be key in determining whether you should approve or deny the tenant’s request.

How To Negotiate Lower Rent: Learn About The Current Rental Market

If your tenant has done their homework, they will present you with rent rates for comparable rental properties to negotiate a lower rent. This information is something you should already know because it is most likely the key factor in determining what you set your rent at in the first place.

As you know, the real estate market rises and falls, and rent rates are no different.

If your rent has been set for a while and you haven’t done the research to see if you are still current, it’s worth finding out. If it turns out your rent is actually higher now than the rental market allows in your neighborhood, you may want to consider reducing the rent to match.

In a worst-case scenario, you don’t lower the rent, your tenant moves out, and you can’t fill the rental property because your rent is too high compared to other properties in the neighborhood.

Negotiating Rent Price: Weigh The Costs Of Apartment Turnover

There is no doubt that turning over a rental unit between tenants will cost you money. Figure out what the cost will be to advertise, screen applicants, clean, repair, perhaps repaint, and otherwise prepare the rental property for a new tenant.

Then, figure out how much of a rent reduction your tenant is asking for, and see which one puts you ahead.

For example, if your tenant is asking for a new rent rate of $75 less per month, and it will cost you around $900 to turn the rental over, you are actually getting the better deal by agreeing to the rent reduction.

Ultimately, being a landlord with rental property is a business and you need to be savvy enough to recognize the best deal when you see it, including when it works for you to negotiate a lower rent.

The Art Of Negotiation

Be mentally prepared to negotiate by keeping yourself open to ideas and opinions.

While you never want to agree to a rent amount that is too low, don’t completely shut down ideas until you’ve really examined them. Generally, a tenant will come in with their ideal offer and you can then negotiate from there.

Going back and forth until both tenant and landlord find a rate they can live with is the best way to ensure that both parties walk away happy. It’s ok to take some time after the meeting to weigh the proposal, so you can really examine it from all angles.

Besides being open-minded and flexible during negotiations, remain respectful. A good tenant who comes to a landlord to negotiate deserves the chance to be heard. Even if you don’t reach a solution, you can still respect each other.

If you provide a truthful, accurate reason why you can’t lower the rent, at least the tenant will understand where you are coming from.

Alternatives To Lowering Rent

Alternatives To Lowering RentIf you simply cannot lower the rent and the tenant feels like they can’t stay, see if there are any renewal incentives you can offer, such as painting the unit, carpet cleaning, free parking, or free cable for a few months.

Remember that a good tenant is hard to find, so it may be in your best interest to try to meet the tenant halfway in the negotiations. Giving a renewal incentive shows that you value the tenant and hope they choose to renew and remain in the rental property.

Learn about some of the most popular renewal incentives, and decide if any of these incentives suit your situation.

Lease Renewal Incentive: Lock-In Rates

One great renewal incentive your tenants might consider rather than a rental reduction is a locked-in rate. What this means is the tenant would be guaranteed a certain rate for a certain amount of time.

In many rental markets, rent is expected to be increased every year. In fact, we often recommend that landlords raise the rent each year to keep pace with rising costs in their area.

By offering to lock-in the rent price, you can incentivize the tenant to stay without a cost reduction.

Incentive: Property Improvements

Another incentive tenants might consider as an alternative to lowering the rent price is for you to make some requested property improvements. For example, you might offer to update the appliances, paint specific rooms, or change out the flooring.

You might wonder why this is a good thing to offer. Ultimately, making improvements to the property will improve the value of your rental property.

Even if you cannot increase rent immediately after doing these improvements, the improvements will still help you limit vacancies and make more money once the current tenant moves out.

FAQs On Negotiating Rent Price

How Do You Negotiate With Tenants Successfully?

The only way to successfully negotiate with tenants is to determine exactly what you are willing to offer, and then be ready to present that to the tenant. The key in any successful negotiation situation with a tenant or a prospective tenant is clarity. If you aren’t sure what you are willing to negotiate, you cannot reasonably have a conversation about the rent price.

How Do You Negotiate A Lower Rent Request With Ease?

First, you need to figure out if you are willing to lower the rent price. If not, consider what other alternatives you are willing to offer if the tenant pushes back. Some common alternatives include improving the property, covering utilities, or locking in rental rates for the upcoming year or two.

Once you have all of this information figured out, it will be easier for you to speak clearly and comfortably with your tenant. Both of you will have clear information and expectations, and that will allow you to come to some sort of agreement more successfully.

How Do You Say No To A Tenant?

If you are certain you cannot lower rent at this time, you will want to find a way to quickly and reasonably explain that to your tenant. What is the best way to say no while continuing to have a good relationship with your tenant?

Turn Down The Request Clearly

When you decide to turn down a rental price request, make sure you do so very clearly. Simply state you cannot lower the rent. Make sure there is no room for confusion or interpretation in your response.

Apologize, But Only Once

When you say no to a tenant, you want to make sure you apologize once for the denial. Do not feel that you need to keep apologizing or apologize too profusely. Ultimately, you are running a business. If you continue to lay on the apologies, the tenant may get the wrong idea and believe you are open to negotiation. That will lead to additional confusion.

Explain Why

Giving a clear explanation about why you cannot approve the request will help keep a good relationship between you and the tenant. If you do not explain why lowering the rent is not possible, they may feel like you simply do not care about them or their request.

Be Polite

When communicating with your tenant about this and all other problems, make sure you are polite. There is no reason to treat your tenant rudely, even if they do not return your civility. Ultimately, you have a responsibility to try to maintain a good relationship.

When Should You Agree To Lower The Rent?

There are not many cases where landlords will feel like they should agree to lower rent. In fact, we do not often recommend that landlords do this. In most cases, agreeing to lock in the current renal rate should be enough of an incentive to keep tenants at the property.

However, there are some cases where lowering the rent could be to your advantage:

  • When managing a very difficult to rent property
  • When the rental prices in the area are dropping rapidly
  • When the property needs refurbishment, but the tenant is willing to delay it
  • When the tenant will take over other fees or payments

As the landlord, you will need to do a cost evaluation to figure out if lowering the rental price will allow you to remain in a profitable situation. This can be difficult to figure out, but it is worth the time to ensure you take the negotiations into proper consideration.

How Is Rental Price Calculated?

Rental rate is typically determined based on a few factors:

  • Property value
  • Included costs and fees (i.e., utilities, HOA fees)
  • Property condition
  • Surrounding rental market
  • Demand

Generally speaking, experienced landlords tend to charge between 0.8% and 1.1% of the property value for the monthly rent. The exact spot in that range should be decided based on taking the other factors into consideration.

Every market, however, is different. Take some time to get to know your local market when trying to set your rental price. Knowing what rental prices work best in your region will ensure that you have as few vacancies as possible.

Are You Ready To Lower The Rent?

Sometimes, working with tenants to lower rent can be a good move for retention and the long-term profitability of your property. In other cases, keeping the rent consistent will be key to keeping pace with the rental market. Ultimately, it is up to you to make these assessments for your property and area to determine the right steps to take.

Have you ever been approached by a tenant for a rent negotiation?

How did it go and did you reach an agreement that benefitted you both? We’d love to hear what happened, so please share the article and let us know your experiences in the comments section.