No landlord fancies having to fill a vacancy in their rental units. Landlords everywhere know the stress that follows filling a vacancy. This sees some consider using a rental concession. Now, when the rental market is strong, rental concessions are not often used. So when are they used?
• Filling a Vacancy Quickly
As a way to have potential renters move in quickly, landlords present an incentive. This is mostly when they want a vacancy to be filled promptly or when there has been a vacancy for too long.
• Lease Renewal
Most landlords wouldn’t want to deal with a new tenant. As a way to get an old tenant to renew their lease, they may offer them a concession. This will prevent them from moving out from the property.
• Slow Rental Market
When the rental units are more than tenants looking to fill them, it might be tough to fill them. As a landlord, offering a concession will draw in tenants into your property.
• First time into the Market
When a landlord is the owner of sizeable rental property and is his first time renting them out, he may choose to give the concession to have most of them occupied rapidly.
Now that we’ve seen why landlords would consider giving out rental concessions, let’s look at the pros to rental concessions:
• Filling a Vacancy Quickly
The first advantage with using a rental concession is that you get to fill a vacancy sooner. This is because you find tenants quickly.
• Reduces Vacancies
When a landlord utilizes rental concessions, they fill their vacancies quickly. This means that they don’t deal that much with vacancies. Additionally, if landlords in a residential area use concessions, the occupancy rate in the area will rise and so will rental prices later on in the future.
• Expire with the original lease term
Some concessions don’t extend for life. Some like a rent-free month, a free parking spot or free access to a gym expires when the initial lease term expires. Others like reduced rent don’t expire. The only way around such a concession is serving a notice of rent increase.
On the other hand, rental concessions are not all rosy. There are some disadvantages to using them:
• Ending a Concession
Some rental concessions might hard to take away. While most tenants will not expect a rent-free month each time they renew their lease, other concessions might not be this elemental. For example, if you allowed the tenant to park for free in their first year and you are now taking away the privilege when the lease expires, the tenant may not be thrilled that they have to pay for a service they got for free, and this may cause them to move out.
• Hiking the Rent
If you got a tenant to move in by reducing the rent, you might have to serve them a notice to notify them of rent increase when their lease expires. Additionally, you could have them sign a new lease, but with a different rental price. All these instances may find the tenant unhappy with their rent going up, and it might lead them to move out.
• Concession on the Security Deposit
If you offered a reduced or no security deposit as a rental concession, you are placing your rentals at risk if the tenant were to damage them or eloped without paying rent.
• Tenants Moving Out
Tenants might move in solely for the rental concessions. Once the offer of the concession is off the table, these tenants will move out to look for other rental units that offer the same rental concession.
Rental concessions might fill your rental units quickly, but there’s no telling whether the tenants moved in because of their love for the units. Once the concession is over, they may either stick there or move out. If you are looking to have your property managed, look no further. At lapmg, we offer property management services and leave you to other pursuits. Check us out here.