It’s official: tenant incentives are back on the table.
Initially, a high number of foreclosures meant former homeowners shifted to renting. Landlords had tenants lining up for vacant units.
But now unemployment is high, and so is inventory.
Many of those foreclosed homes were purchased by investors. When the properties failed to sell, they came into the market as rentals. The same is true of new construction. Too many days on the market forced investors to offer these new lux homes for lease.
Every source you read shows vacancy rates are high and are projected to stay that way for a little while longer. As a result, rent growth potential is low, according to the National Multi Housing Council. Real estate guru and talk show personality Barbara Corcoran confirms that landlords are no longer in a position of power. Tenants, she insists, can ask for “whatever they want.”
Negotiate – but don’t give away the farm!
So, just how much power do tenants have right now? Barbara Corcoran, and property managers in the blogosphere, say “a lot”, but only if they are good tenants.
In fact, Ms. Corcoran’s advice is directed more to existing tenants than new applicants. She describes a “good tenant” as someone who has been paying the rent. Extended lease terms, free amenities or an apartment upgrade make sense to retain a paying tenant and avoid a vacancy.
Retaining your good tenants has always been smart business, but now it’s more important than ever to review your options. We have lots of ideas for tenant retention. Check out our blog 10 Tips for Retaining Tenants.
But with new applicants, landlords are a little more cautious:
“I won’t negotiate with an applicant until I know who they are, and I’ve had a chance to screen them,” says one manager. “If everything checks out, then, maybe, we’ll talk.
Other managers agree: “This market is no excuse to stop screening tenants. Property damage or an eviction can easily outweigh the cost of a month’s vacancy.”
Many landlords report that they are reluctant to lower rent or offer free rent — at least not at the start of the negotiation.
Right now, landlords are more apt to get creative with incentives that don’t require large out-of-pocket losses:
- One of our members installed a 40 HDTV in the unit. The tenant can enjoy it for the term on the lease, and then it stays behind as an incentive for the next tenant.
- An appliance upgrade.
- Offer amenities from the neighborhood – car wash, dinners, health club, yoga class, coffee. Businesses in your area are probably eager to make deals.
- Lower the deposit (if it’s not too risky.)
- Allow pets (with conditions, of course.)
Hone Your Negotiation Skills
Tenants are listening when experts say they can ask for the moon. Be prepared. The best results come from skill in negotiation. Not a natural? Not many of us are, but there are some easy tried-and-true strategies:
- Set boundaries. Before you negotiate, decide your bottom line.
- Arm yourself with information. Make sure you are in line with the market.
- Don’t put your chips on the table all at once. Give a concession for a concession.
- Remember, you’re not adversaries. You both want the same thing – a rented unit!
For more negotiation tips, see Great Real Estate Negotiators Aren’t Born, They Are Made. American Apartment Owners Association offers discounts on products and services for landlords related to your rental investment including REAL ESTATE FORMS, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.joinaaoa.org.
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