As apartment vacancies increase across cities and towns in the United States, more property managers are offering concessions to attract new residents. As appealing as offering concessions may be, they may not be in your best interest. There might be a better way to solve your vacancy issue than by giving away free rent.
Offer Concessions for New Construction
Concessions of free rent are common in cities and towns where developers have constructed thousands of apartments in the past few years. According to property management software company RealPage, at the end of 2017, approximately 20 percent of the existing apartments studied offered concessions of free rent to prospective residents. Property managers offered free rent to prospective residents at approximately 30-35 percent of apartments in Las Vegas, San Antonio, New York, Virginia Beach, Houston and other cities. Managers typically offer concessions of free rent at 10-15 percent of the inventory of apartments in Minneapolis, Orlando, Providence, San Francisco, Detroit, Newark, Jersey City, Cincinnati, Los Angeles, Portland, Riverside and Orange County, CA.
Offer Concessions When They Benefit You
If you have a high vacancy rate or notice to vacate, offer concessions on signing a lease. Attach terms that are in your favor, such as one month of free rent with a 13-month lease. Also, create signing and move-in deadlines that prospective residents must meet to receive the concession. Plus, have new residents sign a concession addendum stating they will pay back any concessions given to them if they break their lease.
When Not to Offer Concessions
You most likely do not need to offer free rent to compete with new properties when demand is still strong and there is not as much new construction going up. For example, concessions are less common in cities such as Sacramento, where developers have built a small number of apartments because rents tend to be too low to support the cost of construction.
Before Deciding Whether to Offer Concessions
Before you decide whether to offer concessions, consider what problems your apartment community may be facing. Has traffic declined? Are your apartments not market-ready? Does your community not have a clearly defined position in the marketplace? Do your leasing professionals require additional training? Do you need a new rent analysis? Is your property lacking in curb appeal? Are your office hours too limited? Solve the real issue to create lasting change to potentially avoid offering concessions. After all, if a new resident receives a concession when signing a lease, they may expect more concessions when they renew.
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