Let’s face it. The past couple of years have been a tenants’ market. With a glut of foreclosures converted into rentals, and fewer rental applicants with steady employment, financial gurus and tenants’ rights advocates alike were encouraging applicants to ask for rent reductions and other concessions. Many landlords felt they had to oblige, to avoid long-term vacancies.
But that was then. Now, indicators are showing that there are more people choosing to rent, many others who can’t get loans to purchase, and few new apartments under construction. In addition, the job numbers are a little bit better. The tables are turning, albeit slowly.
Rent negotiations cost landlords in ways they may not even realize. Whether to engage in a negotiation with a tenant depends on many factors — one of the most important of which is timing.
Timing is Everything
The question of whether to negotiate with a tenant over rent hinges not so much on what the tenant asks for, but when they ask.
If the tenant is asking for a rent reduction before they have even toured the property, they are either testing the waters, or they are trying to get into a property they can’t afford. Either way, to negotiate a rent reduction as this juncture is a losing proposition for a landlord.
In the first instance, the tenant is testing the landlord’s resolve, and the landlord who gives in loses credibility. The candidate who gets their way that easily undoubtedly will ask for more — a lower security deposit, or free rent concessions. Later, it may be pet, or an extra car in the driveway, and so on.
If a tenant is angling for a property that is just a little outside their budget, you can expect that they have made other similar decisions with car payments, cellphone plans, or credit card purchases. When these bills all add up, it is the landlord who will suffer, with late rent payments or a tenant who defaults altogether.
The best course of action for the landlord at this stage is to stick with their price, and carefully prequalify tenants.
Get It Right the First Time
It’s crucial to a landlord’s credibility that the rent that is advertised is the right rent for the property. Setting the rent high with the expectation of negotiating it down is a bad idea.
Once a landlord encourages an applicant to negotiate, then they can expect to haggle over every term of the lease. Eventually, this will erode the tenant’s view of the landlord as the one who is in charge. Be clear with your rules, and don’t give the impression that you are flexible, especially at the beginning of the relationship.
Setting rent has become easier now that apartment hunters have taken to the Internet. There are a number of online rental classifieds that you can run for comparison, including local newspaper classifieds. Now, it is possible to look at comparables anywhere in the country and never leave your home or office.
If you choose to use Craigslist for comparables, be careful–if the price of a property is surprisingly low, it could be a scam.
In addition to online sites, you can also make calls to local leasing offices in the neighborhood, or check out local “for rent” signs to get a feel for the market.
Make Them Work For It
The trick to a successful rent negotiation is to make it a process — to make the tenant work for it. Why do they feel justified in asking for a rent reduction? Their answer will show you how interested they are in the property.
Make them tie their argument to the specific property rather than the rental market in general. For instance, have they recently toured other comparable properties that you may have missed in your research?
Bring your research along with you to the tour to counter their argument that the rent is not fair.
If the applicant doesn’t have comparables, or is still hedging, you may want to pass on this candidate — they haven’t made up their mind that this is the right apartment for them.
Tenants are on a time line, just like landlords. If they are procrastinating, that usually means they are looking at other properties. Turning them down will save you the hassle of negotiating an early termination if they later decide they are not committed.
Ironically, the reality check of being turned away may be just what the candidate needs to drop the negotiation and ask you to reconsider them at the original price.
Be tough, but don’t be stubborn. If a tenant can show you that your price is unrealistic, concede the point and avoid a prolonged vacancy.
Swap Apples for Oranges
For the landlord, it all comes down to money when negotiating rent. But for the tenant, it helps if they feel like they won something, too.
One way to score a win-win with a price negotiation is to counter with something besides a full-on rent reduction, with can plague the landlord far beyond the term of the original lease. For instance, know what your per diem rent is, and if it’s feasible, offer them an extra day or so to move in, or give them a couple free days, and more free time if they renew.
This limits the landlord’s loss of income, and at the same time gives the tenant reason to be satisfied with their choice of rental homes.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
Click Here to Receive Landlord Credit Reports.
Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.