Top 8 Most Effective Leasing Incentives for Renters

Written on September 20, 2016 by , updated on December 2, 2016

Renter IncentivesI’m a firm believer that a landlord should treat his/her rental unit like a business.

As any business owner knows, sometimes you have to provide incentives to acquire and keep customers.

The same principle applies to landlords. There is a rental property on every block, and though your unit is special, it’s not that special.

To find and keep great renters, a landlord will often have to provide incentives.

Understanding the Mind of a Renter

carrot

We need a modern-day carrot

There are four factors that all renters consider before signing or renewing a lease; Location, Price, Condition, and You. That’s right, I said you!

Since you can’t change the location but still obviously want to command a higher price, you have to provide incentives that improve the condition, convenience, or the level of customer service.

If the location and property condition are not ideal, and you’re not willing to do anything about it, you’ll then have to provide financial incentives to spark interest. Realistically, most people would live almost anywhere, and in less-than-favorable conditions, if the rent were low enough.

Related: How to Build Amazing Tenant Relationships

Types of Incentives

…No one should get a prize for doing what is expected of them in the lease.

Whether you are trying to convince an applicant to sign a lease, or encourage a great renter to renew, incentives act as the carrot at the end of the proverbial stick.

With that said, I believe that no one should get a prize for doing the bare minimum or fulfilling what is expected of them in the lease.

1. Early Payment Discount

I believe that a landlord should never discount the rent if a renter pays it on-time – which usually means the absolutely last possible day. However, a small discount might be in order if the renter pays rent 10, or even 15 days early.

2. Rent Decrease

Rent decreases are a great way to convince excellent renters to sign another long-term lease. For this to be profitable, you really need to run the numbers. A $50 discount for 12 months would cost $600/year. Considering vacancy and upkeep, you must ask yourself “will keeping these renters for another year save me $600?”

3. Property Upgrades

Benefiting both the landlord and renter, anything that is a permanent change to the dwelling would be considered an upgrade. Renters who view the property as their “home”, will often ask for an upgrade.

If an appliance is near the end of its life, I’ll usually entertain the request – especially if it gets the renter to renew. Other simple upgrades can include painting, new carpet, additional parking, or even a bathroom/kitchen remodel.

Related: Amazing Paint Colors for Rental Properties

4. Flexible Lease Terms

Sometimes, the ability to break a lease with 30 day notice, or the approval to have pets, is valuable to a renter. Again, you have to weigh the risk vs. reward, but sometimes it’s worth it.

Further, allowing other flexible terms, such as the ability to sublet, will entice a new renter or keep a current one. Student renters often travel home for the summer and want the ability to sublet their room.

Related: How to Make Extra Money by Allowing Tenants to Sublet with Airbnb

5. Online Rent Payments

For many people, their rent payment is the only check they write all month. They would jump at the opportunity to pay their rent online, and finally ditch their checkbook. This added convenience can make a huge difference when marketing to new renters and instantly makes your property more appealing.

Every time I tell a potential applicant that they can pay their rent online, they get really excited. It’s obvious that they are tired of writing rent checks. It’s no secret that I use Cozy to self-manage all my properties, and my tenants love it. I haven’t had a single late payment since switching to online rent collection with Cozy.

Related: Getting Started with Online Rent Payments

6. First Month Free

Larger apartment complexes have the additional cash flow to cushion a free month worth of rent. However, often times, the 11 other months are increased by 1/11th the price to make up for it. Without realizing it, this incentive allows a renter to spread the first month’s payment over the term or the lease, but gives the impression that they are getting something for free. For better or worse, this incentive appeals to renters with little or no cash liquidity.

7. Zero or Partial Security Deposit

Waiving the deposit requirement is popular with large apartment complexes as a means to reduce vacancies, but it’s not feasible for an independent landlord. A landlord needs the deposit as security against unpaid rent and physical damages to the unit. Without it, the landlord has no leverage or protection.

Alternatively, spreading the deposit payments over the first three months will lighten the financial blow to the renter who often cannot afford to pay for first month’s rent and the deposit at the same time. However, it might not be wise to rent to someone who can’t pay the deposit in full.

Related: 7 Tips for Preventing Security Deposit Disputes

8. Anything They Want (within reason)

Last but not least, perhaps it’s best to let the renter request the incentive. You just never know what they are thinking. For example, if they don’t have transportation, perhaps you could let them borrow your bike for the year. Or, maybe providing a partially furnished unit, or an early move-in date, would convince them to sign a lease.

At the end of the day, every landlord needs to market creatively to attract the best possible renters, and to keep the ones who care for the property and pay rent on time.

Many times, it’s the incentives that provide the extra push needed to seal the deal.

What incentives have you provided to your applicants or tenants? Let’s grow this list together. Share your thoughts in the comments below

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15 CommentsLeave a Comment

  • Laura Agadoni

    Hi Lucas,
    I just re-rented a place. I was showing it while the prior tenant was still in, and I noticed that the walls in the living room needed to be painted. But the kitchen, although maroon, did not need painting. I gave the interested tenants a choice of whether they wanted the kitchen left maroon or painted neutral along with the living room. (The verdict was mixed, and I ended up renting to someone who preferred the kitchen to be neutral as well.) I think people appreciated being asked.

  • Teresa

    I rent to college students at a large state university. Believe it or not there are lots of students who take there studies very seriously and don’t want the party life at the college scene. So I provide a no party property. For the last nine years and have had the cream of the crop students.

    • Lucas Hall

      That’s awesome Teresa! Would you like to share that story in more detail? If you’re interested, I’d love to publish an article or two about how you run that property, the decisions you’ve made, and how it’s paid off. I think others could learn a lot from that.

      Let me know if you’re interested. Cheers!

  • Kim

    Gift card at holidays and a thank you for taking good care of the property.

  • Ali

    Hi Lucas-

    I rent condo to students & one thing that I found is useful to them is to have all inclusive rental price. I hear sigh of relief every time. So I provide water, garbage, sewage, internet and electricity included in the rent. For electricity, I have put a cap of $90 and any overage gets divided amongst the tenants and is paid along with the next month’s rent. This ensures that there’s no abuse of the electricity or appliances (ac/heater especially). The good thing is if the bill is less than $90 there’s extra cash in your pocket. Also water, garbage and sewage is covered in HOA fees so it’s really not costing me more but seems to be a good marketing tactic. As the article suggests, incentives need not be monetary.

    • Lucas Hall

      Hi Ali,

      Thanks for the comment! I do the same thing with two of my units. All utilities are included, except that I don’t charge them for overages because it balances out (close enough), when they overpay. Cheers!

  • Dave Morgan

    In the negotiation, concessions are more often pitched by tenants. As the rep for landlords, I listen to the tenant request and with a pause, reply by saying, “This landlord will give you anything you want but you have to give everything the landlord wants!”

  • CJ Ashton

    Re: Letting the renter pay deposit over time.

    The one time we did this, it was a disaster. They were never able to pay the full deposit (even over time) and were late EVERY month for their entire lease. If they can’t manage their money well enough to come up with the deposit, they are likely going to struggle to make the rent payment.

    It was a hard lesson, but a lesson learned, nonetheless.

  • Austin

    My landlord’s incentive to renewing a lease is to only increase the rent by $100/month. If I decide to go month to month then it is $200/month increase. This happens every 6 months because the leases are 6 months. Needless to say after several rent increases I am looking at newer units for the same price. Honestly, I don’t even know if the president of the rental company is aware of what goes on. You would think a landlord would want to keep a tenant who never pays late, never has loud parties, and doesn’t trash the place. You would think the high turnover would get his attention.

  • Polly

    Not bad at all fellas and gasall. Thanks.

  • Maureen

    If I lease an apartment with a $200 per month incentive, does the incentive end when the lease ends and will my rent go up by that $200?
    Thanks in advance. I have no clue about leases.

  • Pamela Partridge

    No initial deposit

    Allowing weekly payment of rent directly into my bank account

    Tenant still became abusive stopped paying rent. Said he was leaving 1st June after 5 months of a short hold Tenancy. I offered him a very reduced deal for final 2 months. He appeared to agree. I think he will leave but I doubt very much that I will get any money from him. I have Landlord Insurance and if he does not give me the reduced amount I intend to pursue him for the full amount,
    Regards ( I am in the UK. Did you know that your information was arriving here?)

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