Welcome, Guest
SIGN IN | REGISTER
MultifamilyBiz.com is the next generation platform on the Internet for the multifamily industry.  
Rental Concessions
Giving Incentives
Multifamily managers seek to maximize profits subject to revenues and costs. Accomplishing this entails maximizing rental revenues within a framework of minimizing vacancy rates and turnover costs. When market competition for residents is intense, achieving desired occupancy rates may require some form of rental concessions such as free rent or payment of moving expenses. Likewise, reducing tenant mobility necessitates incentives that keep existing residents.
Marketing Method
Rental concessions are a benefit, like a discounted rent, in order to attract or retain residents. Many communities needing to lease up units might offer a free rent period or discounted move in rate. In short, it is a marketing method to keep occupancy rates high.
Positive Effects
Studies find that rental concessions have a positive effect on both rent and occupancy rates. Rents may increase, decrease or remain constant thereby defining effective rent. Occupancy rates may change to reflect either the attraction of new residents or lower turnover.
Popular Concessions
There are a variety of enticements to lure renters such as first month discounts, look-and-lease bonuses, free weeks or months rent, added amenities and reduced deposits. Surveys of concessions show the most common are reduced move-in costs and reduced deposits.
Determining Costs
The costs of concessions are usually straightforward and relatively easy to calculate. A free month of rent, pro-rated over a twelve month lease, equals a month of lost rental income. A free microwave costs whatever the microwave costs. Some costs, however, are much more difficult to gauge.
Ghost Concessions
For example, the cost of a reduced security deposit, or the cost of requiring a new tenant to pay only the first months rent up front rather that the last. If it's a deposit and the tenant was presumably going to get the money returned anyway, is it a cost at all?
Deposits Mitigate Risk
While security deposits should not be thought of as rental income, they are a valuable resource that helps owners recoup losses if tenants damage their apartments or fail to pay rent. Properties with fewer security deposits are a significantly riskier investment.
Protect Against Loss
Careful tenant screening help prudent apartment managers manage risk. Also, always include a concession addendum in your lease agreements that clearly states the resident will have to pay back the discount should they break any terms of the lease.


 
 
 | Multifamily Technology Solutions    
 
MultifamilyBiz.com is the Next Generation Internet Platform for the Multifamily Industry and is the place to be for everything touching multifamily housing. From its robust vendor directories to professional blogs, MultifamilyBiz is dedicated to providing a suite of focused, leading-edge, online tools and resources designed to maximize and accelerate commercial activities in the multifamily marketplace.
Copyright 2010 - MultifamilyBiz.com - All Rights Reserved