Figuring how to properly price your rental unit is usually an exercise in research and instinct. You can look at comparable units in an area for more data, or even keep the rent at what it was before you bought the property. No matter how you arrive at your number, the rent that you charge is one of the most important tools that you can use to find and keep tenants.
Table of Contents - How to Negotiate When Your Renters Ask for Rent Reductions
With that said, sometimes this number can be negotiable throughout a lease. During these uncertain times, that has never been more apparent. The COVID-19 pandemic has upended virtually every part of our society, and housing is no different. People have lost jobs either temporarily or permanently, and their assistance programs might differ from case to case.
As a result of so much financial instability, it’s becoming more and more common to see tenants attempting to negotiate their rents with landlords. While this might be a request that you’re willing to accommodate, there are some important tips that you can keep in mind before you head to the negotiating table.
Negotiating before a lease is signed
Before we get to mid-lease negotiations, it’s important to first consider the negotiating that can take place before a lease is even signed. A tenant may be interested in your unit but believe that the price is a bit too high. They might not like its location, its size or its rules, but no matter the reason, they’ve come to you with a different offer than what you had listed it for.
At this point, there are a few things that you should contemplate. First, has the property been unoccupied for a significant period of time? If so, it’s likely been a drain on your wallet since you’ve continued to pay taxes, the mortgage and utilities. You might be relieved to finally have someone occupying it and giving you that cash flow, so you might be amenable to knocking off some money. This is entirely up to you and requires some experience as well – you might want to avoid this if you feel that the market is about to tighten up and you can find someone at your desired rate.
Another thing to consider is the season in which you’re renting the unit. Most landlords and property investors know that rent prices tend to peak in the summer, and that’s also when people are more likely to move. The pool of prospective tenants is likely to be significantly larger in the summer, so you likely don’t need to bend at that point if you’re looking for new renters. However, if someone approaches you about a lower rate on a property in the middle of winter, you might be more likely to consider it.
One valuable tool that landlords have is the ability to improve a tenant’s situation in ways that don’t involve the rent. If your tenant has a specific issue with the place, then you might be able to make them happy without reducing your cash flow. For example, if they’re upset that the landscaping looks worse for the wear, then you can spend a Saturday morning tidying everything up at a minimal cost.
You might also offer a new appliance or two, a fresh coat of paint on the walls or a deep clean of all of the carpets. You can also include some utilities in the rent-free cable or internet can go a long way towards keeping a tenant happy, and free parking can serve the same purpose.
Preparation is key
Before you enter into any negotiation you need to do your homework. For example, you should be prepared for your tenants (or prospective tenants) to come to the meeting with comparable units in the area that match up with their financial expectations. You can perform this research yourself and locate properties that more accurately reflect what you feel a fair price for the unit is. You might still wind up meeting somewhere in the middle, but you should be ready to back up your side with hard data so that nobody leaves with ill will.
You should also be ready to consider how willing you are to lose a tenant. If it took you a while to locate a quality inhabitant of your property, then it’s probably in your best interest to negotiate. It’s far more costly to lose them and sink time and cash into finding a new tenant who you don’t know much about. Sometimes shaving a few dollars off the bottom line to keep a favourable situation going is well worth it.
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Remember the human being when trying to negotiate
These negotiation tips are, of course, further complicated by the fact that we do live in unprecedented times. You might not be aware of the problems that a tenant is experiencing, so go into a negotiation with an open mind. While this is largely a business decision on your part, there’s also an interpersonal angle that you shouldn’t neglect. Kindness with their housing situation can go a long way if someone has experienced a loss in their family, is caring for a sick parent or has recently been furloughed or even fired.
Working with your tenants on an agreement that works for everyone means that you’re far more likely to inspire loyal and respectful tenants to continue living in your properties. Your reputation as a landlord is one of your most important assets, so protect it closely. Be prepared to listen and don’t be afraid to get creative – setting a definite end date for lower payments or offering additional services can be a great way to meet in the middle.
Tenants are more likely than ever to attempt to negotiate rents, and there are many factors that you should consider before deciding if you will accommodate them. It’s always easier to keep a good tenant than to find one, and we do live in an era where many people are experiencing financial turmoil. If you can afford it, it could be a good idea to understand what your tenants have to say.
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