This is where concessions come into play. And no, we're not talking about concession stands that sell your favorite ball game great. We're talking about rent concessions. Here's what you need to know about them before accepting or offering one.
While both rent concessions and discounts offer financial benefits to tenants, they differ in their nature and implementation:
The key distinction lies in the duration and purpose of these incentives. Rent concessions are short-term incentives aimed at immediate tenant attraction or retention, while discounts are long-term arrangements that provide ongoing financial benefits throughout the lease term.
As mentioned, the point of rental concessions is to keep tenants or find new tenants. They're perks, such as reduced fees or sometimes a physical good granted in order to attract new tenants to the unit the landlord must keep filled.
The tenant needs to sign the lease in order to live in the building. They work together to help a landlord fill their space. All new renters will need to have a lease, but concessions are part of the lease agreement itself.
Landlords offer rental concessions to keep their properties occupied, as vacant units may mean losing potential income.. In order to do this from time to time, they will offer rental concessions.
The purpose of rent concessions is to attract new tenants or entice the current renters to agree to a new lease or stay in their existing lease. While it might sound like they're losing money, a temporary concession is much less than the lack of rental income in the long run.
Concessions are often offered when the market is slow. You won't see them offered in a booming rental market.
When it comes to concessions, the landlord makes the call on what to offer which can vary by property. It could be anything from free parking to reduced rent agreed upon in your lease, or even a material item. Here are common examples of concessions that landlords will offer.
Who wouldn't be excited about the idea of a free month of rent? This is typically offered as the first month if it's a new renter or the last month if it's an existing renter. If it's given as the last month's rent, tenants would pay for 11 months and get the 12th month free.It's also a good way of maintaining occupancy in the building.
We can all agree that moving is stressful. To ease this burden, landlords might offer a moving concession to future tenants. This could include covering moving costs, providing a moving van, or even offering a storage locker for the transition to a new place.
Because moving is pricey enough as it is, a reduced rate on the security deposit is a small gesture that can make leasing and the lease terms more appealing to a tenant. However, landlords should keep in mind that when doing this, there's less to pull from if the apartment needs repairs.
If a property manager has a space they must fill, sometimes, one of the rental concessions they'll offer is a discount on rent. This is either temporary or long term depending on the lease term.
Landlords will either offer this as a way to get someone moved in or they'll offer it to multi-year contract tenants so they re-sign when their lease expires. While this might seem like a loss in rental income, it’s often worth it to avoid the hassle of keeping a unit on the market. Once the lease term is up, however, it's up to the landlord and tenant to agree to new terms.
Free amenities are another rent concession possibly offered to a potential tenant. If the property has areas such as gyms, pools, laundry rooms, or a parking lot, the landlord would waive the fees or lower the cost for the new tenant.
You might also come across rental concessions that include lower-cost upgrades to your future property, such as new appliances or better floors. Make sure that the property follows through on these upgrades before you agree to your lease.
Whether you're a landlord, or an existing or prospective tenant, there are things to know when it comes to offering or receiving a concession.
If the landlord continuously makes rent concessions to keep the building full, it could be a red flag indicating a larger problem with the building. If you see this happening, you can act on it by asking your landlord to clarify what's going on. It could save you in the future from paying or signing a lease for a rental property you'll regret.
As a landlord, there are things you should know before offering rent concessions to attract a tenant. Be aware that temporary concessions, such as free parking, reduced rent, or access to amenities, might lead to tenant dissatisfaction or frustration when they are removed. This frustration could potentially drive tenants to seek other rental options.
As a landlord, it's important to attract tenants to sign a lease and fill a unit. But, you have to think long term, as well. Keep in mind that renting is a business and offering certain concessions can hurt your bottom line. Do some research and reach out to financial advisors to make sure your business doesn't suffer from offering any.
Here are a few key types of concessions to consider:
These are typically used on newly constructed buildings to fill the capacity of the building in order to make a profit.
This type is often used on older, renovated buildings. The idea is that the apartment itself is slightly above the average market rent but, with the concession, it's brought down to the current standard.
Whether you're a tenant, land owner, or landlord, there's a time and place for rent concessions. They're a good way to get a new tenant to sign a lease for your property and fill space. They're also beneficial to the tenant because it can mean saving cash when moving. As always, do your research on the property and lease before you act and accept a concession.
