Vacancies mean lost rental income and increased work for Landlords. If you’re having trouble finding a qualified applicant for your rental property, you want to be proactive about marketing the unit and finding a good Tenant. 

One strategy to consider is rent concessions. These can be an effective way to make your rental listing more competitive and attract more applicants. That said, there are some drawbacks to concessions and some legal implications to consider. 

Here’s a guide to using rent concessions to help you decide if they’re right for your rental business. For more real estate investing tips or to send a screening request to applicants, visit ezLandlordForms.

What Are Rent Concessions? 

A rent concession is a short-term incentive that Landlords offer to Tenants to attract new applicants or retain existing occupants. It’s a strategy used in competitive rental markets to help minimize property vacancy costs without lowering the monthly rent. 

When vacancy rates are high or there’s a lot of competition for quality renters, one way to be competitive is to lower the rent. However, that means a monthly decrease in cash flow, which can really impact your annual return with a long-term Lease Agreement. 

This is why rent incentives are an appealing alternative for property owners. One-time discounts or incentives are less expensive than reducing monthly rent and can help fill vacancies faster. 

Common Types of Rent Concessions 

Some of the most common concessions that Landlords offer are: 

• One month of rent free or the first month free 
• Discounted rent for the first 6 months – for example, a 10% discount for the first 6 months of the rental contract 
• Credits or gift cards with moving companies to cover moving expenses
• Waived application fees or waived tenant screening fees
• Waived security deposit or reduced security deposit 
• Waived pet fee 
• Free access to amenities that usually have a fee – for example, storage units, parking, or laundry facilities

The takeaway here for Landlords should be that there are lots of options when it comes to rental incentives. Landlords can use the unique features of their unit or area to lead to increased tenant attraction and tenant retention. 

When Should Landlords Offer Rent Concessions

While rent discounts mean less income for real estate investors, there are times when they’re a good choice to improve overall returns. Consider using rent concessions if you have: 

• Multiple vacancies. If you need to fill a multi-unit property or happen to have multiple vacancies at the same time, a rent concession can help make the vacancy costs more manageable. 
• An extended property vacancy. In slow markets or in unusually competitive areas, rental units can sit vacant for extended periods. A rental incentive can be a good way to find a renter during a slow period.  
• Good Tenants who you want to keep. Turnover costs and vacancy expenses are almost always more than the cost of rent incentives. Plus, offering reliable Tenants a rent concession signals that you value them and want them to stay, which can increase tenant retention and improve landlord-tenant relationships. 

Creative Incentives to Attract Tenants Without Lowering Rent

When considering rental incentives, try to get creative. Think about the people that your rental unit will attract and what incentives might appeal to them. The more creative you can get, the better chance you have of distinguishing your property from other units on the market. 

Here are some unique move-in specials or rental incentives to consider: 

• Add smart home tech to your unit – for example, smart thermostats, security systems, and smart plugs. 
• Include free snow removal or yard maintenance. 
• Offer discounts to nearby businesses – for example, a gym, restaurant, or local shops. 
• Upgrade the unit’s appliances or fixtures.
• Offer flexible lease terms – for example, a 6-month term or an 18-month term.
• Offer referral bonuses for current Tenants who refer a new Tenant.
• Create a loyalty program that involves rewards or upgrades for long-term renters. 
• Offer an improved property management strategy to lead to a better rental experience – for example, free access to an online rent payment system. 
• For multi-unit buildings, schedule events to highlight the community feel of your property – for example, fitness classes, movie nights, or barbecues. 

Potential Drawbacks of Rent Discounts and Move-In Specials

While there are plenty of perks, rental concessions have some potential drawbacks beyond just impacting cash flow. Some negative impacts that rent incentives can have are: 

• An expectation that you’ll always offer the perk. For example, if you waive the parking fee for Tenants for the first year, they will likely expect to get free parking in the future. This can lead to negative landlord-tenant relationships after the initial discount period. 
• Increased Tenant turnover. Some incentives might attract a Tenant who is looking for a quick deal, rather than a quality long-term renter.
• Increased late rent or missed rent payments. Tenants who get a month free or an initial rent discount often have trouble keeping up with the full rent payments once the discount ends. 
• Resentment from current Tenants. If new Tenants get perks or discounts that current Tenants did not get – for example, free amenities, snow removal, or waived fees – it can make current Tenants feel cheated. 

Landlords should consider these potential drawbacks and find ways to address them before implementing limited-time rent offers. After all, if the goal of a rent concession is to minimize vacancy costs and retain quality Tenants, you don’t want to offer specials that inadvertently lead to increased Tenant turnover and vacancy rates. 

Legal Implications of Offering Rent Discounts or Credits

Property managers and owners also need to consider the legal implications of rent concessions. You don’t want to end up with fines, lawsuits, or legal trouble because your rental incentive violates an applicable law. 

Here are a few legal considerations to keep in mind before offering a rent concession: 

• Fair Housing Laws: Landlords can get into problems with rent specials if they don’t offer them consistently. If you offer a special to one applicant but not another, this can be seen as discriminatory. To avoid fair housing issues, be consistent about offering concessions. Have a written policy for any special terms or incentives and offer the same incentives to all applicants. 
• Document all rental concessions in your Lease Agreement. Some cities and states require this, but it’s a good practice for all Landlords. 
• Review local and state rent control laws. Some locations have specific regulations for concessions, so it’s important to comply with those regulations when applicable. 
• Document the impact concessions have on your rental income and work with an accountant to ensure accuracy on tax returns. 

Get the Most Out of Your Real Estate Investments 

Whether you’ve just purchased a new rental unit or are looking for tips about keeping long-term renters happy, ezLandlordForms has you covered. We’ve got the tools you need to attract and keep quality Tenants, like complete tenant screening services and online rent payments. 

Plus, we have a resource library full of investing and property management tips. Create a free account today and let us help you get the most out of your real estate portfolio.