Looking for a new place? You might find that landlords are willing to make a deal. These temporary deals are called rent concessions, and they’re offered to attract new tenants or keep existing ones from moving out.
These days, rent concessions are more common than you might think. In fact, a recent study found that 54% of renters in the U.S. receive some type of concession when they move into a new place.
This guide provides a comprehensive overview of concessions for rent from both the landlord and tenant perspectives. We’ll cover the different types of concessions, the pros and cons of each, and best practices for negotiating and utilizing them effectively.
What are Rent Concessions? Defining the Basics
In a competitive rental market, landlords sometimes offer incentives to attract new tenants or keep the ones they have. These incentives are called rent concessions.
Rent concessions sweeten the deal for renters without actually reducing the rent.
It’s important to understand that rent concessions are temporary. They don’t change what your monthly rent will be over the long term.
Rent Concessions vs. Rent Discounts
Rent concessions differ from rent discounts. Concessions are temporary incentives, while discounts permanently lower the monthly rent.
For example, a landlord might offer one month of free rent to entice you to sign a lease. That’s a concession. On the other hand, a landlord might permanently reduce your monthly rent by $100. That’s a discount.
Types of rent concessions: A comprehensive overview
If you’re in the market for a new rental, it’s good to know that you may be able to negotiate some money-saving perks, especially if the rental market is soft in your area. Here are some of the most common types of rent concessions you might find:
Monetary concessions
- Free rent. Landlords sometimes offer one or more months of free rent. For example, you might see a sign that says, “Get one month’s free rent when you sign a 12-month lease.”
- Prorated rent discount. A landlord might also adjust your rent depending on how long you plan to stay in the rental.
- Reduced security deposit. You might be able to get a lower security deposit than usual, or the landlord may waive it altogether. For example, you might see an offer of “$1,000 waived security deposit.”
- Moving cost assistance. Some landlords will cover some or all of your moving expenses.
Non-monetary concessions
- Free amenities. You might be able to get free access to amenities such as parking, a gym, or extra storage space. For example, you might see an offer of “$60 waived parking for three months.”
- Free or reduced utilities. Some landlords will cover some or all of your utility costs.
- Property/appliance upgrades. A landlord might be willing to upgrade appliances or make other improvements to the unit to entice you to sign a lease.
Rent Concessions by Location
What kind of rent concessions you can expect will vary depending on where you’re renting. Here’s a quick look at the common practices in a few different markets:
- Urban Areas: In cities like New York, you might see landlords offering a month or two of free rent or covering broker’s fees.
- Suburban and Rural Areas: Rent concessions are less common in suburban and rural areas, but you might be able to negotiate a lower security deposit or have the landlord cover some of the utility costs for a limited time.
- Less Competitive Markets: If an area has high demand and low vacancy rates, you probably won’t be able to get any rent concessions. Landlords in these areas don’t need to offer incentives to attract renters.
It’s always worth asking about concessions, especially if a property has been vacant for a while.
Pros and cons of offering rent concessions: A landlord’s perspective
As a landlord, you’re running a business, and it’s important to consider the advantages and disadvantages of any strategy you use.
Advantages of rent concessions
- Fill vacancies faster. A rent concession can be enticing. When you’re trying to get an income-producing property occupied, offering a deal may be just what you need.
- Bigger pool of applicants. Similarly, a concession can bring in more applications, which gives you more renters to choose from.
- Higher tenant retention rates. Renters who feel like they’re getting a good deal may be more likely to renew their leases.
Disadvantages of rent concessions
- Reduced short-term rental profits. You’ll be making less money, at least for a while.
- Attracting less-qualified applicants. The renters who are drawn in by a concession may not be the most reliable or responsible tenants. It’s possible they’re more interested in a deal than in your property.
- Concessions can create future expectations. Once you offer a concession, renters may expect you to offer another one at renewal time.
These factors will help you decide whether offering a rent concession is the right move for you.
Strategies for Landlords: How and When to Offer Rent Concessions
Rent concessions can be a valuable tool for landlords, but it’s important to use them strategically. Here’s a look at when and how to offer them.
When to Offer Rent Concessions
- In Competitive Rental Markets: If there are lots of vacancies in your area, you may need to offer a concession to compete with other properties.
- When Vacancy Rates are High: The faster you fill a vacant unit, the better. Concessions can help you get there.
- During the Offseason: Rental markets usually slow down during certain times of the year. A concession may be just the thing to entice a new tenant.
- When Desirable Tenants Might Leave: If you have a tenant you’d hate to lose, consider offering a concession at renewal time.
How to Offer Rent Concessions
- Understand the Rental Market: Before offering any concessions, do your homework. What are vacancy rates like? What are your competitors offering? What are tenants in your area expecting?
- Time Your Rent Concessions Strategically: Don’t just offer concessions willy-nilly. Think about the timing. Are you in the slow season? Are lots of leases coming up for renewal?
- Set a Budget & Crunch the Numbers: Figure out how much you can realistically afford to give away in concessions. Don’t cut your own throat!
- Target Ideal Tenants: Think about the type of tenant you want to attract. Are you looking for someone who will sign a long-term lease? Someone who is quiet and respectful? Tailor your concessions to appeal to that person.
- Clear Communication and Documentation: Make sure the terms of the concession are clearly spelled out in the lease agreement. No ambiguity!
Rent Concessions from a Tenant’s Perspective: How to Negotiate and Plan
So, you’re thinking about asking for a rent concession? Here’s how to approach it, plus some things to keep in mind as a renter.
How to Ask for a Rent Concession
- Do your homework: Find out what other properties in the area are offering. Knowledge is power!
- Be direct: Clearly and concisely explain what kind of concession you’re hoping to get.
- Negotiate at renewal time: Use the possibility of concessions as a bargaining chip when it’s time to renew your lease.
- Get it in writing: Always, always, always get the concession agreement down on paper.
Rent Concession Considerations for Renters
- Do the math: Figure out the actual dollar value of the concession. Is it really worth it?
- Plan for the future: Remember that the concession won’t last forever. “You could see a large increase in your overall housing expenses once the concessions expire,” says our real estate expert, Khari Washington.
- Read closely: Scrutinize the fine print of the agreement to make sure you understand all the terms and conditions.
- Budget accordingly: Adjust your budget now to prepare for when the concession ends and your expenses go up.
In Closing
Rent concessions can be a powerful tool for both landlords and tenants. Landlords can use them to fill vacancies and attract desirable renters, while tenants can benefit from lower upfront costs or other perks. However, landlords also need to be aware that offering concessions can reduce their short-term profits.
Whether you’re a landlord offering rent concessions or a tenant seeking them, it’s essential to approach the process strategically. Communicate clearly, document everything carefully, and ensure you’re in full compliance with all applicable laws and regulations.
Finally, remember that the rental market is constantly evolving. Landlords should continuously monitor the performance of their concession strategies and adjust them based on market conditions and tenant feedback to maximize their effectiveness.