Something all landlords will have to master at some point is the art of negotiating. If you are a well-seasoned landlord, you’ve probably had a renter try to negotiate the rent price. Renters will often want to negotiate a lower rent price whether they are new tenants or current ones renewing their lease. Especially in the current economic climate, many renters are struggling to make payments and so it’s vital you maintain constant communication with your renters – make sure you weigh the pros and cons of different situations and what you are financially able to do. If you are educated about the rental market in your area and have open lines of communication with your tenants, negotiating with them won’t have to be a stressful process. Below we have compiled a quick guide on how to negotiate rent with your tenants:
Do Your Research
When it comes to running your rental business, you should always do as much research as possible beforehand on a variety of issues including setting the right rent price to get the best ROI on your property. Having the right rent price relative to your area will not only help you stay competitive in the market but also help you receive more applicants so you can fill your property fast, according to many of our TurboTenant landlords. Here is a full guide on how to price your rental, but if a renter is asking to re-negotiate the rent price, there are some important factors you should consider:
Is your rent comparable to other rentals in the area?
- Unless it is a new property you’re trying to fill, most likely you have already done your research and priced your rental correctly to compete with other properties in the same area. If your current rent price seems too low or too high in comparison, you might need to readjust accordingly. You can purchase a rent comparison report here.
Is your rental more/less desirable than others in the same area for the same price?
- If your rental has a great location, good backyard, a lot of parking, or other amenities, then that needs to be factored into the price of your rental. If there are other properties charging the same for less amenities, you should consider increasing the rent. Amenities are desirable aspects and some tenants won’t mind paying more for them.
Are there rent freezes or rent control laws in your state?
- Some places, like California, have laws against raising the rent. Also, during the pandemic, many areas enacted rent freezes to prevent landlords from raising the rent for a certain period of time. Make sure you check your local and state laws to understand what you can legally do.
Check Your Financials
When it comes to rent negotiations, it’s important to know what you can and can’t afford, just like the renter. If your property is paid off, you might have more wiggle room – but, for the majority of property investors, you need the constant cash flow of rent to pay your mortgage and run your business.
Never risk putting your investment in danger just because you like your current tenant who is asking to lower the rent. When renters come to you for rent re-negotiation, hopefully, they will have also done their research. If they have, then you should take the time to listen and weigh the pros and cons of keeping them or finding a new tenant. If you are in an off-season, it might take you longer to fill your property which means the cost of lowering your rent price might be less than what it would take to find a new tenant. Every landlord’s financial security is different and every relationship with a tenant is different – remember, doing your research and checking with your accountant or financials will help you feel more confident and prepared when a tenant comes to you to re-negotiate rent. Meeting in the middle with them, or offering incentives, as we mention below, are all good ways to handle negotiations.
Will You Have a Vacancy Soon?
If you are close to a vacancy and your current tenant is trying to negotiate rent, depending on the season, it might not make sense to adjust your rent price as you will probably be able to find a different tenant who will pay what you are asking for. For example, in the busy summer rental season, marketing your property online will give you many leads to help you narrow down the best tenant for your property. On the other hand, if a current tenant wants to renew their lease, but is trying to negotiate rent, you could consider negotiating so you can keep them – especially if they are a great tenant who doesn’t cause trouble and pays rent on time. Since we are living in unknown times, finding a good tenant, and keeping them can help you and your rental business feel more secure during unstable times – check out our lease renewal guide for further details.
Additionally, if you are in the process of finding a new tenant, don’t skip out on tenant screening – if a tenant applies and also wants to negotiate rent, a screening report will let you know if there are any red flags. Mainly, if they can even afford rent or if they will be able to pay rent on time – if they are trying to re-negotiate rent and don’t meet your tenant screening requirements, it’s probably a red flag. Remember, protecting your investment should always be your number one priority in the rental business.
Other Incentives in Negotiations
A great option landlords can take advantage of when renters try to negotiate rent is offering incentives that will satisfy the renter, but also help landlords keep their property up-to-date. Here are four great incentives for updating the property as well as easing financial burdens on tenants:
- Lower security deposit, no late fees: If you know your tenant usually pays rent on time and during routine inspections they’ve kept the property in good condition, lowering a security deposit or getting rid of late fees might be attractive to them.
- Free parking pass: Depending on the type of rental unit you own, if a parking pass is sold separately, offering free parking is always attractive – especially in college towns.
- Carpet cleaning: Getting the carpet cleaned is a refreshing and needed task for rentals – if they have pets, it could also help remove any stains or smells that would be deducted from their security deposit.
- Repainting: This is another house project tenants would appreciate as a fresh coat of paint can do wonders – you could even offer to let them choose from colors you picked out.
Covid-19 and Negotiating Rent with Tenants
It’s no secret the pandemic has wreaked havoc all over the world – especially to the economy. Because of this, if renters are coming to you to re-negotiate rent or if they already have, it’s most likely due to job loss and the lack of funds to be able to afford rent.
Once again, communication with your tenants during this time is highly-necessary. They need to know they can talk to you openly and honestly about their financial situation so you can work together to come up with alternative solutions. It’s important they talk to you before rent is due so they don’t miss payments, putting you both in a bad situation. Additionally, with the Centers for Disease Control’s temporary eviction moratorium, you might consider re-negotiating so they can consistently pay rent. Even if your area doesn’t have rent freezes enacted, if you usually increase rent yearly, consider keeping it the same so your current tenants will want to renew their lease.
Whether you choose to lower rent for tenants or offer different incentives during negotiations, don’t forget to make sure it is legally binding by making an addendum to the lease agreement that is signed by both parties. Ultimately, negotiating rent is up to each landlord – being prepared and knowledgeable about the rental market will help the process feel easier. If you are in need of filling your property, don’t forget to screen your tenants and have them fill out an online rental application.