Should you negotiate rent?
This is an interesting topic. We have been asked to negotiate on rent for all types of reasons.
Our most common answer is “no” we do not negotiate on rent. We run a professional business, and we know the market, however, I figure since this topic has a lot of grey areas, I will share some stories, and you can decide what the best strategy is for you and your business.
Story 1: Gut feeling turned into a long term tenant– We had just finished a major renovation on a two unit property. The units turned out better than expected and we figured it would command top market rent. One unit we had occupied right away and then we placed an ad for the second unit. We had some viewings and even a couple of applicants that did not work out. Then I showed it to a guy that had a great job, and loved the location. He seemed to really like the apartment, but when I asked if he would like an application, he said “he would have to think about it”. Often times that is not a good phrase to hear, because if he truly thought it was great, he would want to fill out an application. My gut told me he was perfect for the place, so I asked him what his hesitation was. It turned out that it was a great place, except the price was just a bit higher that he had budgeted, so he figured he would continue his search. In this case, we had bought this property vacant, and did not have any rental history, so I thought maybe I was over priced a bit for the market. I worked out a deal for $50 per month less. He filled out an application, it checked out great and I had an awesome tenant for three years. In this case I feel my asking price was a bit above market. That is not where I want to be. In my opinion, I would argue the sweet spot is just below market, then if you look after your properties and any tenant concerns, they will stay longer. If you are over market, someone might agree to rent for a bit, but if they feel they are over paying and similar places come on the market for less, they will likely move. We all know the cost of a turnover can eat up revenue really quick. My point is, that if you are asking the right price, you should not have to negotiate.
Story 2: Reduced rent for service – We had a rental property that had a lawn that we would cut. I would personally go over and cut the every couple of weeks. It was not a huge deal, but as our business grew, it became more of a challenge. I decided I would ask one of the tenants in the property that if I provided the whipper snipper and lawn mower, I would give them a $25 per month rent reduction, if they were willing to mow and whipper snip the lawn. The tenant thought it was a great idea, and mowed the lawn for as long as they lived there. It was a win, win for both of us.
Story 3: Kijiji offer – We have an awesome classified ad site that we use for listing our properties for rent. It is very effective, but it does have one draw back. It is a free site, and you cannot control who uses it, or what they might say or email to you. I find it strange that people would make an offer on something they have not seen and to people they have never met, however, it does happen. We do not respond to these types of offers. It is my opinion that if someone is serious, and I think they should be considering it is a home. They would not just send a random offer. I will give you an example: we might have a place advertised for $1000 plus utilities, and someone will email and say; “would you take $800 utilities included?”, or “I will give you $900 including utilities”, or something like that. We might be missing out by not taking these types of leads seriously, but I am willing to take the risk.
Story 4: Multiple unit discount – This has happened to us a few times where one person or family will want to rent more than one unit. We have given a price concession in these cases. I will caution you to not get too carried away. Reducing the revenue in a building should always be taken seriously. The margins are already very thin.
Story 5: The no reason ask – sometimes people ask for a discount for the sake of asking. It is important to not get offended. We have had some great tenants over the years, who started out by asking for a rent reduction when they applied. They often back it up with a list of there great tenant qualities, but forget that the market determines the amount of rent, and since you only accept qualified applicants, all your tenants will exhibit similar qualities. I will have to admit that I often ask for discounts or better prices when I am shopping for just about anything. It does not mean I am not interested in paying the asking price, I just figure it never hurts to ask. We just say no.
Story 6: Retired / senior citizen all in pricing – we often find that when we rent to some seniors they are concerned about the cost of utilities, since they are often on a fixed income. Seniors are often great tenants, and stay for a long time. We will usually work a deal with them.
I hope these stories help,
Michael P Currie