What Are Rent Concessions & When Should You Offer Them?

If you are a landlord, then your primary concern is probably keeping your rental properties profitable. The key to doing so is to keep your properties rented out and to retain tenants who pay their rent on time each month. One of the ways that you can achieve these goals is by offering rent concessions.

A rent concession is essentially a discount or other incentive that is designed to minimize vacancies or retain good tenants. Rent concessions can be a smart strategy in slow rental markets, when you’re having trouble finding tenants for a property, or when you want tenants to sign a longer-term lease or renew their lease. While there are drawbacks to rent concessions, when executed properly, they can be a smart strategy for landlords.

Eaton Realty offers expert-level property management services to landlords and property investors throughout the greater Tampa region. Our proactive, professional approach to property management can help to minimize vacancies and retain great tenants. We can also advise you on strategies like rent concessions in tough markets. Contact us at any time to set up a consultation with a member of our property management team.

What Is a Rent Concession?

A rent concession is effectively a discount offered on rent to attract new tenants or to retain existing tenants. When the market for tenants is particularly competitive, or there are a lot of vacancies in an area, offering a rent concession can be a way to make a rental property more appealing.

Rent concessions are sometimes referred to by other names, such as move-in specials, rent specials, tenant credits, or rent discounts. It is usually a one-time incentive that is offered by landlords to tenants. In some cases, rent concessions may be offered on a more regular basis, such as on a monthly or annual basis.

Types of Rent Concessions

There are many types of rent concessions a landlord can use. These concessions may be advertised as part of the marketing of a rental property or negotiated as part of the lease. Examples of potential rent concessions include:

• A rent reduction in exchange for a tenant signing a one-year lease
• Waived fees (such as move-in fees or pet fees)
• Prorated or free rent for the first month of a lease
• Reduced or waived security deposit
• Free utilities (such as internet) or other amenities that usually carry a charge, like parking

Landlords can get creative when it comes to negotiating rent concessions. As long as the offered incentive is legal and non-discriminatory, a landlord can offer any discount or incentive that tenants may want.

Benefits of Offering Rent Concessions

The main goal of a rent concession is to make a rental property profitable. Whether that means attracting new tenants, filling vacancies, or retaining tenants, a rent concession can be a valuable tool for landlords. The money that a landlord may lose with a rent concession is often far outweighed by the benefits of having a long-term, stable tenant in your rental properties and/or reducing vacancies.

Downsides to Offering Rent Concessions

Of course, like any strategy you deploy for your rental unit, there are cons to consider before offering rent concessions.

Removing the Concession Could Cost You a Tenant

When you offer some type of incentive, it may be difficult to take it away. For example, if you offer a tenant free internet for a year or discounted rent to get them to sign a lease, they may choose not to renew the lease if you don’t continue to offer that benefit. In this way, the concession will have served a short-term goal of getting the unit rented, but it may not fit with your longer-term goals.

Concessions May Attract the Wrong Type of Tenant

Rent concessions may also be a bit risky in terms of the type of tenant that you attract. For example, if you need to offer a rent discount in order to get a tenant into your property, you might find that the tenant who ultimately signs the lease isn’t as reliable as other tenants. Proper tenant screening can reduce that risk, but it is still something to consider for landlords.

Concessions Reduce Potential Earnings

Finally, rent concessions do typically mean less money for a landlord. While it may ultimately result in more profit, there is no question that offering any type of concession will initially be money out of your pocket. You will have to weigh your financial situation carefully to determine if it makes sense to offer a rent concession.

When Should You Offer a Rent Concession for Your Rental Property?

Deciding to offer a rent concession can be tricky for landlords. After all, on its face, a rent concession means that you are losing money. If you have a house that rents for $2,000 a month, it may seem like a bad idea to offer a month of free rent - you’d be losing $2,000!

But if you look at it from a different perspective, that $2,000 may be a small price to pay to get or keep a good tenant and keep the house rented. If your rental house sits vacant for months, that could represent a much bigger loss. On the other hand, if you get a long-term tenant, that rent will either pay your mortgage or serve as passive income for the next year or longer. There are a few times when it makes sense to offer a rent concession.

The Rental Market Is Slow

First, if your rental property is vacant, then it may make sense to advertise some type of discount to attract tenants. This is a common option when the market is slow, a landlord is leasing a new, large rental property (such as a multi-unit condo building), or is having difficulty finding new tenants.

You Want to Retain a Good Tenant

Second, you may choose to offer a rent concession to encourage a tenant to renew their lease. This is often used when a tenant isn’t sure about renewing their lease or as a proactive measure to incentivize a lease renewal. You can offer your tenants a discount or some other incentive as a way to get them to sign a lease for another year (or longer), keeping your property occupied and in good hands.

Retaining good tenants is one of the top ways to keep your property profitable. As any landlord knows, it can be challenging to find a great tenant who pays their rent on time and does not cause any damage or problems. A rent concession can be an incredibly useful tool if you want to keep a great tenant.

You Want to Charge Rent Higher Than the Market Rate

Third, you may want to offer a rental concession as a marketing strategy. You could set the rent price at slightly above average market rental rates and then offer a concession to bring the rent down to a price that is in line with the market. This gives the appearance of a reduced price while still resulting in a rent price that is suitable for your business needs.

Of course, this strategy can be tricky to employ. Tenants may see through it and be turned off by what they believe to be manipulation. Using rent concessions as a marketing tactic should be done carefully and only in situations where the market supports it.

The decision to offer a rent concession can be a difficult one, as there are both advantages and disadvantages to this type of strategy. Generally, if the potential gain or profit is larger than the downside, then a rent concession is probably worth it. Our Tampa property managers can walk you through your options if you want to fill a vacant rental property or retain a reliable tenant.

Important Steps To Take When Offering Concessions

Any rent concession that you offer should be carefully documented. If you are offering a rent discount, for example, the lease should be specific about what the rent is for each month and when the discount will end. For example, the lease could state that the rent will be $1,500 per month from February through April, and the rent due on May 1 will be $2,000 per month.

In addition to detailing any rent concession in the lease, you should provide your tenants with notice about any upcoming changes. While you aren’t required under Florida law to do so, it is a good idea to remind your tenant of the regular rent rate before it is due or to let them know that they will lose access to a certain perk (i.e., starting on May 1, you will be charged X amount per month for internet). This is an easy way to avoid misunderstandings.

Reduce Vacancies & Attract Better Tenants With Eaton Realty

At Eaton Realty, we take a proactive, professional approach to property management. Our services include marketing, tenant screening, and day-to-day property management, including monthly rent collection and disbursement. We work diligently to keep both landlords and tenants happy, which can help to increase tenant retention and reduce vacancies.

We also list all of our properties year-round on our website, regardless of vacancy. We include the date that each rental property will be available so that prospective tenants can plan ahead. This strategy, along with our extensive marketing work, allows us to minimize vacancies for every property that we manage. In many cases, our homes are rented with few or no days on the market.

This type of forward-thinking property management can help you avoid the need for rent concessions. If your rental properties aren’t sitting vacant, you won’t ever need to offer a discount to get them rented. If you do want to offer a rent concession to retain a tenant or for another reason, we can help you decide on what type of concession would be best. Our team will also work with you to ensure that any concession that you offer is properly and legally documented.

If you own rental properties in Hillsborough County, you don’t have to handle it all alone. We offer premium property management at great rates, giving you the advantage of our real estate expertise, market knowledge, and vast network of contacts. Reach out at any time to talk to a West Central Florida property manager about your rental properties.

Expert Tampa Property Management from Eaton Realty

In certain situations, a rent concession may be the best way to minimize vacancies, retain great tenants, and maintain profitability. While there are downsides to these types of incentives, when employed properly, they can be a smart move. Our Tampa property management team can help you decide whether it makes sense for you to offer a rent concession to your tenants.

Based in Lithia, Eaton Realty offers property management services to landlords throughout Hillsborough County. We work hard to minimize vacancies and to keep tenants happy, which can cut back on the need for rent concessions. To learn more about our property management services, fill out our online contact form or call our office at 813-672-8022.