What Are Rent Concessions + When to Offer Them

A rent concession is any discount or adjustment made to rental fees, security deposits, or other fees paid by tenants. They are also known as leasing concessions, tenant incentives, or apartment concessions.

If you are a landlord or property manager, offering a rent concession addendum can be a great way to build and foster a strong relationship with your tenants. It can be mutually beneficial for both parties involved.

Wondering what types of concessions landlords can offer? Let's delve into it a bit more.

Reasons to Use Rent Concessions

Let’s look at a few of the major benefits of adding a rental concession for your renters.

Attract New Tenants

Offering an upfront concession is a great way to attract new tenants and stand out from other listed properties. Consider offering the first month rent-free or discount rent for a limited time to get more applications in.

Stand Out from Competing Units

A concession rental term can be beneficial if supply is high and demand is low, as it can help a unit stand out from competing units. Similar to attracting new tenants, a rent offer can help draw the eye of even current tenants to avoid having to fill vacancies later on down the line.

Offset Property Issues

If a property has issues that impacts its functionality or livability, such as pest problems or poor maintenance, you can use a lease concession to offer one-month free rent or a rent reduction so that you can retain the tenant and avoid the costs of vacancy and turnover.

Increase Rent Renewals

A concession fee discount can help increase rent renewals while decreasing your rental turnover numbers. In addition, by focusing on keeping the tenants you currently have in your properties, you won’t have to worry about filling their vacancies.

Support Tenant Financial Difficulties

In terms of providing support to renters in need, you can offer rent concessions to support your tenants financially. Or, for incoming renters, you can provide first-rate rentals to help offset the financial difficulties that they may be facing.

What to Consider Before Offering Rent Concessions

Now that you have a better understanding of rental concessions, let’s consider a few factors you should take into account before offering them:

• Potential Financial Impact: Rent incentives will temporarily impact your bottom line, as lenders will want to look at rental income when buying or refinancing.
• Current Rental Market: If there is a limited supply of rentals in the area, it’s not the time to offer rent concessions.
• Tenant Demand: Understanding the rental market means reviewing tenant demand, which, if it is high, means skipping the concessions for now.

If you have assessed your situation and believe a rent concession is a good idea, here are a few different approaches you can take.

10+ Types of Rent Concessions

Let’s look at the types of rent concessions you can offer your tenants based on your situation!

1. Move-In Specials

Landlords can offer rent concessions in the form of move-in specials to help attract new tenants to their properties. Move-in specials can include things like waived application fees and first month’s rent-free.

2. Rent Reduction

Rent reduction is a type of rent concession that can help get new tenants into a property by offsetting some moving costs. A rent reduction can also be helpful if the market shifts toward the end of a current tenant’s lease.

3. Rent Deferral

To help foster the tenant-landlord relationship, some landlords may offer rent deferral during financial hardship. Additionally, a rent deferral can also help to assist with move-in costs upfront.

4. Moving Assistance

Moving assistance rent concessions can come in many forms, offsetting high moving costs. Landlords can offer everything from reimbursing costs of storage units, moving trucks, movers, and even brokers’ fees.

5. Reduced Security Deposits or Move-In Fees

Because moving is an expensive upfront cost, some landlords offer reduced security deposits or move-in fees to help fill their vacancies quicker.

6. Discounted or Free Amenities

Landlords looking to fill their vacancies might opt for discounted or free tenant amenities. For example, if tenants are required to pay a monthly rate for a parking space, landlords can offer to discount this during the duration of their lease.

7. Flexible Lease Terms

Another often overlooked rent concession is a flexible lease term. It can be challenging for renters to find lease terms that allow them the flexibility they need for their work, families, etc. However, flexible lease terms are an excellent way to offer a different product from competitors.

8. Waived Late Fees

You can waive late fees to help during financial duress. However, you should add verbiage that states you will only waive the first late fee to avoid tenants consistently making late rent payments.

9. Waived Pet Fees

If you allow pets on your property, consider waiving the pet fee to entice renters to apply. With all the costs of moving upfront, any help a renter can get they will likely be more than grateful for.

10. Upgraded Units

Landlords can offer upgraded units as rent concessions. For example, if multiple units rent for the same price, but one has recently been remodeled, a landlord can offer a rent concession for an upgraded unit at no additional cost.

11. Upgraded Appliances

Landlords can offer upgraded appliances within a rental unit as rent concessions. For example, if multiple units rent for the same price, but one has the newer appliances, a landlord can offer a rent concession of upgraded appliances at no additional cost to the renter.

How to Calculate Rent Concessions

It's crucial to understand the difference between gross rent and net effective rent before calculating and offering rent concessions to tenants. The former refers to the set rental price, while the latter takes into account any discounts or adjustments made for tenants.

To calculate the amount of rent concession to offer, consider how much rental income you are willing to forego. Depending on your objectives, the concession can range from $100 to $1,000. Deduct the agreed amount from either the rental price or one-time fees charged to the tenant.

Final Thoughts

Now that you have all you need to know regarding rent concessions, you can decide if promoting one suits your current situation. Remember that even first-time landlords and property managers should consider a rent concession addendum to provide a mutually beneficial olive branch in fostering the tenant-landlord relationship.

Of course, finding great tenants to start with is key. Learn more about how you can list your property on Apartment List to find high-quality tenants!