When your property can’t seem to keep reliable tenants, you might start to consider ways of sweetening the deal, such as offering incentives.
Your property may be great, but that doesn’t mean you’re immune to bouts of bad luck with tenants, increased competition, and environmental nuisances like neighborhood construction projects. When the cards are stacked against you, a discount can help speed up the tenant search and reduce the negative financial effects of vacancies.
The benefit of filling your space may very well be worth the added expense, but make sure you first do a cost-benefit analysis by making sure adding an incentive won’t make your total expenses greater than your total income.
Here are seven practical tips and techniques.
1. Reduce your fees
Review your contract to see if you can be flexible with some of your listed fees. Tenants who review your agreement are likelier to sign on the dotted line if they don’t have to factor an excessive amount of additional costs into their budget. For instance, if you charge for amenities such as laundry or parking, the cost of waiving those fees may be negligible compared to the benefit of winning over a reliable tenant.
If you can manage without the extra income, waive the application fee for background and credit checks. Note that if you use Cozy, applicants are automatically charged for this, but you might apply this charge toward first month’s rent as a way to waive the application fee.
Remember that you’re trying to attract tenants. Applicants have a greater justification for renting with you if they feel like they’re getting a deal they couldn’t find elsewhere. The loss in fee collection is minimal compared to the vacuum of an unoccupied apartment draining your resources.
Of course, make sure that you trust the potential tenant and your screening process before going down this route.
2. Offer discounted rates
Discounted rates are clearly attractive to potential tenants, but this solution requires some careful math on your end.
Evaluate your expenses and the rates offered by your competition. Compare the costs of offering a monthly reduction against those of an extended vacancy, making sure that your property is still profitable with the deal you offer. Do you have the room to lower your rates if it means signing a tenant more quickly?
You could also offer discounts in return for more convenience. If a tenant can pay rent each month through automatic electronic payments rather than physical checks, for example, you can offer a rent reduction for making your financial life a little easier.
3. Consider a longer or shorter lease
Another way you may discount rates is to offer an extended lease for a lower monthly rate. The longer renters stay with you, the more your risk of extended vacancies is reduced.
The point of an extended lease is to keep your renters making regular contributions to your business. Keep an eye on your local market and any proposed tax changes to assess the risk of settling into a longer-term agreement. While you’ll receive less money for your unit, it may prove more consistent and reliable down the road.
On the other hand, some tenants may not be sure if they’ll be sticking around for a full year. If you need to fill a vacancy now, offering a shorter lease that allows for tenant flexibility may prove beneficial. This is especially true if you’re trying to find a tenant in an off-season. If the shorter lease ends in the summer, for example, you’ll have an easier time finding a more long-term renter.
4. Create more flexible terms
Renting an apartment is an enormous commitment, and a strict lease can turn otherwise excited applicants away. If you relax the terms of your agreement, applicants might feel more secure in deciding to sign with you. And there are small, inexpensive changes you can make to your contract to improve its appeal.
Offer a deal to find new tenants who may be perfectly great renters but crave flexibility that other landlords lack. Pet-friendly apartments are enticing to animal lovers searching for a place that accepts their furry friend. Permission to decorate the property may win some prospective tenants over. Others will find an early lease termination clause appealing, giving them a degree of freedom unavailable from your competitors.
5. Offer upgrades
If you can’t swing a rate reduction, property upgrades can be a powerful incentive for new tenants. Replacing an old oven with a newer model, painting the walls a more modern color, or increasing storage might win over tenants looking for a fresher living space. Property upgrades create value for you, too, since they will make your rental more attractive for years to come.
Be careful not to overspend on a project that will eat away at your profits. After all, you’re still responsible for all maintenance costs down the line. You don’t need to offer lavish upgrades to appeal to new tenants when simple improvements can make an impact. Something as simple as installing more shelving can please a renter without extending your regular budget for new projects.
6. Put together a gift basket
For those new tenants who have recently signed a lease, welcoming them to your building with a gift basket can be a great first step toward building a friendship. Renters who feel a closer connection with their landlord are more likely to renew their contract once it expires.
It doesn’t have to cost a lot to look like a nice gesture. Gift cards to local restaurants or the movie theatre, food, or a bottle of wine are all possible options when stocking your gift basket. An edible arrangement can make a good impression on your tenants.
7. Provide a free first month
At first glance, it seems like a ridiculous ask of any landlord. Who in their right mind would sacrifice an entire month’s rent? But consider the money lost on an already vacant unit that’s accruing nothing but dust, and a month of waived rent is well worth the income that will begin to flow in afterward.
When does offering a deal become a gimmick?
Some potential renters are wary of deals, seeing them as “gimmicks” that a landlord uses to attract the naive and gullible. After all, if the landlord has to offer a deal to find new tenants who will stick around, they might think the property suffers from an issue not explicitly advertised.
This is particularly relevant to No. 5 above. Densely crowded urban areas with high rent prices often have apartments that advertise a free month’s rent in exchange for signing a lease. While this isn’t misleading, these concessions can lead tenants to enter an agreement they’re unable to manage.
As a landlord, you need to fill your rentals. The fortunate news is that there are many ways to accomplish this task. As long as you do it with respect and fairness to everyone involved, you’re well on your way toward managing a happy, busy property.