by Lucas Hall
I’m a firm believer that landlords should treat their rental units 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, landlords will often have to provide incentives.
There are four factors that all renters consider before signing or renewing a lease: location, price, condition and you.
Since you can’t change the location but (obviously) still want to command a higher price, you have to provide incentives that improve the condition, convenience or 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 anywhere, and in less-than-favorable conditions, if the rent is low enough.
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.
Early payment discount // 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.
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 per year. Considering vacancy and upkeep, you must ask yourself “Will keeping these renters for another year save me $600?”
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 or kitchen remodel.
Flexible lease terms // The ability to break a lease with 30 days notice, or the approval to have pets might be valuable to a renter. Again, you have to weigh the risk versus reward. 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.
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.
First month free // Larger apartment complexes have the additional cash flow to cushion a free month of rent. However, oftentimes, rent during the 11 other months is increased by 1/11th to make up for it. Without realizing it, this incentive allows renters to spread the first month’s payment over the term of 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.
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.
Anything they want (within reason) // Last but not least, perhaps it’s best to let the renters 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, 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.
Article compliments of Community Investor Magazine