In order for your East Bay rental property to stay profitable, you’ll need to find and attract tenants consistently.
But if you’re in a situation where you can’t find new tenants, or you’re in a hurry to replace a tenant who just left, you may want to consider offering a deal to new renters.
These types of ‘deals’ are also commonly known as rent concessions. In this article, we’ll explain everything you need to know about rent concessions and whether or not you should offer one.
What Are Rent Concessions?
A rent concession is a compromise a landlord makes to their lease agreements in order to attract tenants. If you want to attract tenants to your East Bay property, you can offer a one-time, short-term concession.
Landlords normally offer a concession as a temporary incentive for new renters to sign a lease, thus helping to fill vacancies quickly.
Rent concessions may result in a lower income for the moment, but the idea is that they’re a sort of investment. By filling the vacancy quickly, you avoid the risk of greater income loss than if your East Bay rental stayed vacant.
One common example of a rent concession or ‘deal’ is waving the first month’s rent. By doing this, you’ll attract more applicants and can get back to earning a profit from your investment.
You can also offer this deal to tenants whose tenancies are ending, if you want them to renew.
Different Types of Rent Concessions
As a landlord, you can offer your tenants many different forms of concessions.
You can offer your tenants a rent rebate/discount, free amenity/service, or the waving of a fee. You can mention this concession in your listing ads when marketing your vacant rental.
You can also offer concessions to current tenants to keep them renewing their lease every year; some landlords choose to offer concessions on a quarterly or yearly basis.
While rent concessions are the landlord’s discretion, sometimes, a tenant or prospective tenant will request one before signing/renewing a lease. At this point, you’d need to negotiate based on your needs and the needs of the tenant.
Reducing the rent amount or waving a month’s rent is the most common form of rent concession. However, you can be creative in the concession you offer.
Examples of Rent Concessions
- Free rent for the first month of tenancy
- Waived fees (such as pet fees, move-in fees, etc)
- Waiving the security deposit altogether
- Discounted rent for signing a long-term lease (1-2 years)
- Allowing the tenant to paint the unit or make other changes
- New furniture, appliances, or renovations
- Offering to pay their moving costs, such as a van or locker
- Allowing them to use paid amenities for free, like parking, storage, or laundry facilities
- Free Wi-Fi
These are just a few examples of rent concessions that landlords in the East Bay use to keep and attract renters.
If you’re planning on buying an investment property in East Bay, CA, there are three types of rent concessions you should be familiar with:
1. Lease-up Concessions
This type of concession is normally used for new buildings, especially commercial properties. This concession type helps lease the property quickly and increase its occupancy rate, helping you get a return on your investment.
2. Red Flag Concessions
This is a kind of concession that might make you reconsider a specific rental property before buying it. Be careful about buying a property that continually uses concessions just to keep it rented.
This could be a warning sign of underlying issues with the unit.
3. Marketing Concessions
Marketing concessions are typically used to attract renters to older or renovated properties.
Essentially, the strategy is to list the property at a price slightly above the average rent, so the concession then appears to bring the price back in line with the market.
This can be done as long as your East Bay rental property is reasonably occupied and priced in-line with the current market.
When Should You Use Rent Concessions?
Rent concessions are generally reserved for when you’re opening a new, large property, when the market is slow, or when you’re just having a tough time finding new tenants.
If you have a great tenant whom you want to keep around because they always pay rent on time and treat your property with respect, you can offer them a concession to encourage them to renew.
Having long-term tenants is one of the best ways to keep your rental profitable, so it’s important to keep the good ones around.
By offering a concession, you reduce the risk of vacancies. This will save you money on marketing and maintenance. If your unit has been sitting vacant for some time, it might be a good idea to consider rent concessions.
Disadvantages of Offering Rent Concessions
Even though rent concessions can help you attract and retain tenants, you’ll also have to deal with some cons.
For example, if you offer a rent concession, a tenant may not want to let go of the privilege and mistakingly assume the concession in place is permanent.
If you offer free parking for the first month of the tenancy, they may want you to offer it again once it’s time to renew their lease.
Similarly, if you take away a concession, that might motivate them to move out. If you offer a rent discount for just a month or two, the tenant may want to leave once it goes back to the full price.
As a landlord, you can negotiate with your tenant to renew concessions as you see fit.
To protect yourself while using concessions, make sure to be clear in the lease how long the concession will last. Include a specific timeframe and make sure the tenant understands that it’s not permanent.
Other Ways to Find Tenants
If you want to find new tenants for your property but you’re not sure about using rent concessions, there are alternatives.
Contact East Bay Property Management. We’ll find tenants on your behalf and screen them to make sure they’re responsible and can afford rent every month.
Our marketing skills have proven effective over the years, as we’ve helped countless East Bay property owners get the best ROI on their property investment.
Get in touch today!