Here are 5 ways to prepare for rent negotiation with tenants.
Sometimes landlords who have been in the business a long time can get stuck in the way they deal with the tenants. Because of this, it can be beneficial for a landlord to occasionally look at the decisions they make from the point of view of their current and prospective tenants. While it’s always a good idea to consider your tenants’ wants and needs when interacting with them, I want to look at some of the specific advice your tenants may be acting on.
I recently ran across an article on Zillow.com written for renters titled: How to Negotiate Your Rent. I gave it a quick read and realized that this was the type of advice that a majority of renters out there will hear on the subject. And since most tenants’ experience with negotiating only happens once per year (if they bother at all), many will choose to hop online to get some pointers before sitting down with you. So, while you undoubtedly have more experience negotiating rent than they do, who wouldn’t want a look into the mind of the person they were about to negotiate with?
I’m going to address the advice in the article referenced above. Give it a quick read if you haven’t already, but keep in mind there are a lot of resources out there for tenants — you may want to additional research on your own every now and then.
No. 1 – Research rental prices before rent negotiation
Obviously, you should be doing this already. How else can you make sure your pricing your units appropriately?
I guarantee your prospective tenants are comparison shopping every day until they finally choose their new home. However, you should also expect your current tenants to be shopping around when their lease is coming to an end. What does this mean for your rent negotiation? Be prepared to hear about a place just down the road that has cheaper rent than you.
My recommendation would be for you to educate yourself well enough about the area that you can immediately respond with, “Oh, you mean Dogwood Towers?” or “That charming 3 bedroom / 2 bath on the corner with the palm trees?” Doing so shows that you are knowledgeable about the area and your competitors, and that the rent you’re asking takes into account all variables and is priced competitively. From there you can effectively explain the benefits of your place compared to the others.
No. 2 – Sell yourself
We know that a good tenant can be hard to find.
For the most part, tenants now know this too and are right to use their great rental history and credit score as a bargaining chip. You know what can also be hard to find- a great landlord with a desirable property that is vacant. Acknowledge that the tenant is a great renter or applicant, but don’t forget to sell yourself and your property as well. This works hand-in-hand with the previous topic.
If you know the neighborhood well, you will be able to quickly point out the areas where you are exceptional and deserve the rent you are asking for.
No.3 – Go long on leases
I think the advice in this section is applicable to both landlord and tenant, as locking the tenant into a lease that lasts longer than a year has benefits for both parties.
The tenant can better plan ahead without worrying about moving expenses and rent increases. The landlord doesn’t have to worry about the hassle and expense of finding a new tenant and preparing the unit for renting again. You can use this as a bargaining chip as well, even if the tenant doesn’t bring it up. You can include a set rent increase per year that you can then offer to reduce or remove if negotiations call for it.
No. 4 – Sweeten the rent negotiation pot
Here the article suggests that the renter offer to do work on the property, or pay multiple months of rent upfront, for a decrease in rent. I don’t like the first option for many reasons (many of which have been written about on this website in the past), but the second may be attractive to some landlords. The idea, however, is to think outside the box, which I think is covered better by the last section.
No. 5 – Don’t fixate on money
Smart tenants will ask for some other concessions when you don’t want to budge on the rent. If they don’t ask, be prepared to offer something to the good tenants that look like they might slip away.
The sky is really the limit, and it depends on what you’re willing to offer and your aversion to risk. If your appliances are getting a little old, think about offering to replace them a few years before you were planning. Maybe you’d be willing to paint the interior or spruce up the outside. If you’re negotiating with an exemplary tenant you would really like to keep, you can offer to refund some of the security deposit to put a little cash in his or her pocket. Once again, think outside the box. If there’s some area where you can’t budge, be ready to give a little in another area to keep a good tenant from getting away.
If rent negotiation is war, you need to think like your enemy. Spend a few minutes a month, or at least each year, to read some of the resources your tenants will be consulting before they approach you. However, if negotiations are like war, the best way to win is to not have to fight at all. Be proactive and offer incentives before they’re asked for. When it’s time to renew a lease, be sure to serve it alongside some benefit to your tenant. When a great potential tenant comes to see a property, think about acknowledging their worth and offering a bonus to keep them from looking elsewhere. Remember, happy tenants make for happy landlords.