If you’re in a market in which it’s not always easy to find a tenant for your rental property, you may have faced a proposal from a prospective renter to negotiate the rent amount. Some landlords are adamantly opposed to this. They stubbornly stick to their guns and accept vacancy with the hopes of greater revenue potential. But the truth is that it is sometimes necessary and beneficial for landlords to negotiate rent with their tenant. Below, we’ll cover how and when it makes sense for landlords to negotiate rent.
When to Negotiate Rent
When should landlords negotiate rent? When they have to. It may feel like an inadequate answer, but it’s the truth. If you’re struggling to fill your property, it’s time to consider lowering the rent amount.
Likewise, if you have a great tenant that you really don’t want to lose and they threaten to move to another apartment unless rent is lowered to match, you may also want to strongly consider it. Is another $50 a month worth the headache of turning the unit, finding a new tenant, and risking a resident that might not be as great a tenant as they are? The answer is likely no.
Don’t, however, consider negotiating rent in the middle of the lease. The tenant signed a legal contract with you. They owe you the agreed upon rent until their lease expires and you have no reason to change that. There may be a couple of extreme exceptions to this, though. If something has changed dramatically (e.g. there was damage to the property, an amenity previously offered is no longer available, their parking went away, etc.) you may want to strongly consider altering the rent in kind.
In some instances, your tenant may also express to you a change in their income or expenses. Be careful here as you don’t want to be taken advantage of, but it’s certainly appropriate to show some compassion and work with any down-on-their luck tenant to help them get things back on track. Just ensure that change is either temporary, or still works within your business long term.
How to Negotiate Rent
If you’ve decided you are willing to negotiate rent with a particular renter, you now need to consider how you want to go about that. There are thousands of books and articles published on the art of negotiation and many of those tips could apply here.
For landlords specifically, though, the key is to understand your market. Is the current rent your property is listed for or the amount a tenant is paying now lower or higher than market rent? If a tenant proposes a number, will you be able to attract a different tenant for a higher number? If not, you may want to strongly consider the price they suggest.
It’s also generally best to let the tenant start with an offer first. If they say, “this feels a little high to me,” don’t respond with a lower number. Ask them what they think a more appropriate price would be and work from there. If you start guessing, you may guess lower than what they’re actually looking for!
How to Avoid Negotiating Rent
The truth of the matter is, if you find yourself in a position in which you need to negotiate rent, you may have some other underlying issues. In all likelihood, if the only renters interested in your available unit are trying to negotiate the rental amount, your listing may be too high.
This is a big mistake. An overpriced listing means many potential renters simply won’t even inquire. If you only attract renter’s that want to negotiate, they are going to be more likely to attempt to negotiate or demand more in the future. Similarly, if you start with a price that is too high and then later move the price down, many tenants will have already written off your property and location.
As a landlord, you’re always looking for ways to maximize the value of your rental property. Sometimes, that means settling on a price that is lower than what you had originally intended. If negotiating rent is in the service of keeping your unit occupied with a quality tenant or if it brings you closer to market rate, it may be something worth considering.