Should You Offer Concessions on Your Rental Properties? Why or Why Not

Offering a concession, or a move-in special, is a great tool to help attract potential tenants to vacant apartments and increase current tenant satisfaction. Especially in times of uncertainty, concessions can help you sign leases for properties that would have otherwise sat vacant — one reason for their popularity during the COVID-19 pandemic.

You don’t have to offer concessions; many landlords don’t. However, if you are considering it, read on. In this article, we will outline everything you will need to know on offering rent concessions for rental properties.

A rental concession is a special offer or discount that encourages new or returning residents to sign their lease. There are two types of rent concessions: recurring or one time.

A recurring lease concession is an offer that is applied by property management to a tenant’s account monthly — most often in the form of a rent reduction. Here’s an example: Let’s say you want to offer a $50 recurring concession to the next five people who sign a lease at your building. If the rent price on your units is normally $800, then those five people would have a special rent amount of $750 each month.

One-time concessions are given out once, and most often refer to giveaways, such as gift cards or prizes. So, instead of offering $50 off monthly, you could offer the next five people who sign a lease a $200 gift card. In that instance, your tenants’ rent payment would still be $800, but they would get a $200 gift card at the start of their lease term. 

One-time concessions could also be prorated over a period of time. For example, if a landlord offers a new tenant a free month of rent, they may ask the tenant to pay $733 each month of their lease instead of $0 for the first month and $800 for each following month. In this case, the one-time concession affects their net effective rent (a term that takes any discounts into account when renting) rather than their gross rent.

Some other examples of rent concessions could be:

The possibilities are endless when it comes to what you can offer as a concession. However, there are some major factors that come into play when deciding what to offer, which we will explore next.

Your rental market plays an important role when determining what specials you should offer at your property. Concession dollars should be built into any property owner’s annual budget, meaning that you have a cap on what you can spend.

In order to get the most out of your budget, you want to choose concessions that act as motivators for prospective tenants. Let’s say your property attracts a lot of pet owners. You want to offer a gift card, but you notice the prospects you are losing are not tempted enough by the $200 to sign a lease with you. A better concession to consider could be waived pet rent, as it may look more attractive to your most prominent demographic: pet owners.

Doing market research and paying attention to what concessions your competitors are offering will help you stay informed on what specials matter the most to prospective tenants. Once you have chosen which concession you want to run, take extra steps to ensure the details are listed in your lease agreements and on marketing materials, including your website and social media.

How to Track Rental Concessions

Keeping track of what you’re offering and when you’re offering it is essential for staying in line with your budget. It also comes in handy if a resident feels they should be entitled to a concession they didn’t get. There are two great ways to run concessions: 

Capping how many people can sign for a concession — like by announcing that only the next 30 tenants that sign qualify for a given special — allows you to know exactly how much money you are spending on the concession going in.

A lot of specials will only be good for a certain amount of time, making them even more desirable to prospective renters. How much you will spend can be difficult to know going into the special, as you cannot always estimate how many people will qualify in that window of time.

Whether you decide to cap the number of people who can sign onto a concession or run it for specified dates, it is crucial you write down the details of your concession, which can easily be done on a spreadsheet. Be sure to include who qualified for the special, the amount of money spent on the special, and the dates you ran the special.

You can use rent concessions as a quick and easy way to make your rentals more attractive to prospective tenants. If you offer the right special, you can fill vacancies faster, increase existing tenant retention and lease renewals, stay successful in a competitive market, and boost your overall customer satisfaction. However, like everything in life, there is always a flip side. You may run an ineffective special that does not give you the traction you were hoping for or you may even spend money that you didn’t have to, because your vacancies would have filled anyways. Concessions require careful consideration, planning, and execution in order to be successful.

Ultimately, the decision to offer concessions is a strategic one, tailored to your property’s needs. Use this guide to determine what special, if any, is right for you — whether you’re thinking about a month of free rent, a reduced security deposit, a rent discount, a gift card, or something else entirely.