Updated January 20, 2021
When Your Tenants Want to Negotiate Rent Prices
Every landlord goes through rent negotiations at one point or another. Either a great prospective tenant wants to negotiate rent prices before signing the lease, or an excellent tenant wants to negotiate before renewal.
Simultaneously, you don't want to be stuck with a vacancy, but you don't want to concede too much on rent cuts that will eat into your profits.
Here are a few negotiation tips to help you negotiate rent prices.
Conduct Market Research
In any negotiation, your first action should be to get prepared. When it comes to rent negotiation training, preparation must include market research. Check what similar properties in the area are charging. Ask yourself, "Are your rental charges below or above average market rates?"
Beyond market rates, find out what amenities those properties are offering their tenants. Do other rental properties have easier access to recreational parks? Is the area safer? Do tenants get extra parking spaces?
Once you have the answers to your questions, you will understand why your client wants to negotiate rent prices. Thanks to your research, you have the information you need to counter their points or minimize how much you concede. You never know; it may turn out you need to adjust rent upwards to match your neighbors.
Increase Property Value
Are you anticipating a rent negotiation with your tenant? If so, one negotiation training tactic would be to develop a strategy to increase the property value rather than lower rent.
For instance, would it be cheaper to give the place a fresh coat of paint, install new AC units, and upgrade the ovens?
Find out what amenities your tenants value most. If upgrading amenities would justify a rent increase or persuade your tenant to keep paying their current rent rate, then go for it.
Expenses to increase property value works in your favor as you will get fewer calls for repairs. Property upgrades may even gain your tenant loyalty because you're the landlord who cares about your property enough to upgrade amenities and fixtures regularly.
Calculate Potential Concessions
Negotiation classes teach that challenging positions seldom help your cause. Keep an open mind and keenly listen to your tenants' concerns. If the reasons given by the negotiating tenant are compelling, it might be better to offer a reasonable reduction rather than lose a quality tenant. Before entering negotiations, calculate how much you would be willing to reduce your current rent rates to keep your tenant.
Remember that a tenant vacating means you will incur extra costs and time inconveniences, including professional cleaning services, creating new listings, advertising, screening new applicants, and scheduling showings. And, after all the time and effort, you may end up with an inferior tenant when you could have prevented losing an excellent one.
For a good, trouble-free tenant who pays on time, you can offer a slight rent decrease if your calculations support you. However, it would be better for a problematic tenant to risk a vacancy rather than tolerate their trouble for another year.
You've prepared for the negotiation, and now, the meeting is set. Negotiating training prepares you to remain professional at all times. Keep your cool even if the tenant gets overly passionate. Be open-minded as this is a negotiation, not a hostile gladiator contest.
Point Out Moving Costs
If you're negotiating a lease renewal with a current tenant, you can remind your tenant of their moving costs to discourage them from leaving. Remind them of the hassle and costs of moving. They will also have to pay for security deposits, which can be a determining factor your tenant might not have considered before.
However, you have to be careful in how you bring up moving costs. You need to be the sensitive landlord rather than the obnoxious landlord who gets away with overpricing because your tenants have little choice.
Negotiate and Retain Good Tenants
Keeping an open mind could be worthwhile if you have the kind of tenant you want to keep. If your current or prospective tenant wants to negotiate a lower rent, lend them your ear. Be honest about your position and be ready to throw in some incentives. If the tenant gives compelling reasons, use your research to make an acceptable concession. Weigh the pros and cons early before you negotiate rent prices. To ensure the best result, take some time after discussions before coming up with the final offer or agreement.
About the Author: Simon Beaufort is the resident editor at The Negotiation Experts, with more than five years of experience. Simon has a master's degree in writing and has been creating and editing online content ever since.
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