Having a vacancy can really weigh down the return on investment. When there’s no monthly income to expect, there is still a ton of expenses to cater towards. Examples of such expenses include property taxes, mortgage repayments (if any), and property maintenance costs.
So, once your Regina rental property falls vacant, you’ll need to have a solid marketing strategy in order to attract tenants. You may need to use a combination of both conventional and modern marketing tactics , such as using “For Rent” signs, running ads in local papers, as well as promoting your rental on social media and top listing sites.
But what if that marketing strategy fails? When nothing seems to work, you might want to consider rent concessions. This is a compromise you may make in the lease terms in order to attract a tenant.
What Is a Rent Concession?
A rent concession is a short-term incentive meant to either attract a new tenant or retain an existing one. The goal of offering a rent concession is to reduce the turnover rate or vacancy of a rental property.
Landlords use rent concessions to overcome losses arising from a vacant unit. Basically, the sooner you are able to rent out your Regina home, the sooner you can collect the returns on it.
Sure, offering a rent concession might mean lower earnings. However, the rationale behind doing so is to benefit from having a long-term tenant. In fact, you may actually make more of a profit by avoiding these costly vacancies!
What Are the Different Types of Rent Concessions?
Rent concessions come in many forms, and you can provide your tenant (or prospective tenant) with whichever you feel most comfortable with.
The first type of rent concession can come in the form of a rent rebate, fee waiver, or free amenities. Marketing a vacant property with these offers can greatly help catch the attention of prospective tenants.
You can also use a rent concession to encourage a tenant to renew their lease for another term. Landlords typically offer them in various ways, including one-time offers, on a quarterly basis, or on an annual basis.
A rent concession can also be asked for by a tenant before signing the lease agreement.
While reduction of the rent amount is perhaps the most popular method, rent concessions can come in a myriad of ways. The following are the most common ones:
Waiving the first month’s rent. Of course, the tenant will still have to pay the security deposit as well as other fees. Please note that the deposit shouldn’t exceed the rent of one month. It should also be inclusive of other fees, such as key deposits and pet deposit
Prorating the rent for the first month. Prorated rent is the amount you charge tenants for the number of days they occupy the unit. In other words, your tenant will only pay you rent based on how many days they have stayed on the unit rather than on the total monthly price
Waiving some move-in fees for your new tenant. You can, for instance, waive the pet deposit fee for a tenant having a pet
Offering a rent discount in exchange for a longer lease term. If you have a great tenant and their lease is coming to an end, you can offer them a rent discount in exchange for signing a longer lease agreement
Upgrading the rental space. Does your rental unit seem a bit worn ? If so, that might be the reason for the higher tenant turnover rate or prolonged vacancy. Examples of upgrades you can make include replacing cabinet doors, adding a fresh coat of paint, and installing new flooring
Offering to move a new tenant in for free. You can, for instance, indicate on the rental ad that you’ll pay for the moving truck
Allowing a tenant to personalize their space. This can be a great incentive to retain a great tenant. You can allow them to, say, repaint the unit to their favorite colour
Offering amenities such as free laundry and/or laundry facilities
Using these types of rent concessions can help you gain and retain great tenants.
What Is the Best Time to Use a Rent Concession?
Consistent rental earnings are key to having a successful rental business. Thus, ensuring your Regina rental property is always occupied is crucial.
Now, rent concessions can be used in either of two ways: to retain quality tenants or to fill up a vacancy .
Do you have a dream tenant? That is, one that cares for your unit, pays rent on time, notifies you of maintenance issues, and is generally low-maintenance? If you do, retaining them is key to having a great bottom line. In such a case, you’ll want to offer them rent concessions that would convince them to renew their lease.
The other best time to use a rent concession is when you’re experiencing a prolonged vacancy. If your Regina rental property has been sitting empty for a while, offering tenants a rent concession can help speed things up.
Are There Some Cons to Using Rent Concessions?
Rent concessions play a vital role in attracting new tenants and retaining existing ones. That being said, there are some disadvantages to offering them.
For one, your tenant may have a difficult time letting them go. They may think they are there to stay. For example, if you offer them free Wi-Fi, laundry services or parking, they may feel shortchanged if you don’t extend them when the time to renew the lease comes up.
If you choose to take them away, there is the risk of them moving out. The same applies to rent discounts. Going back to the original rental price may lead to some sort of falling out. To avoid such issues, clarify in the lease how long a rent concession will run.
Vacancies are every Regina landlord’s worst nightmare. If you are having a hard time finding a tenant, GoodDoors Property Management can help. We know how to find quality tenants quickly! Contact us today to learn more.