You’ve probably seen ads offering reduced rent, free rent, or other discounts to tenants for the first month. Discounts are a central part of marketing and if you can offer a deal, why not?
While good rent deals will attract potential tenants, you’ll inevitably attract people with money problems. That doesn’t mean you shouldn’t offer deals, but you’ll need to be strategic and extend your deals beyond rent reduction.
Choose your words carefully
Be intentional with the words you use to describe your deals. For example, avoid using words like ‘cheap’, ‘free’, ‘bargain’, and ‘discount’. Instead, use words like ‘complimentary’, ‘bonus’, and ‘reduced’.
Say you want to offer $400 off the first month’s rent. An ad that reads, “First month’s rent will be discounted by $400” sounds normal, but the word ‘discount’ makes it sound like a bargain bin deal. A more powerful choice of words is, “First month’s rent will be reduced by $400.”
The difference is subtle, but important. For many people the word ‘discount’ is subconsciously associated with lower quality bargains and, therefore, might attract the wrong people.
Offer the right incentives
If you want to use incentives to attract potential tenants, you’ll need to look beyond rent deals. There are many types of discounts, but not all are applicable to real estate. For instance, you could offer the second month’s rent free and call it a “Buy One, Get One” (BOGO) deal, but that would be awkward.
Make sure you offer incentives that make sense to tenants and provide value where it matters. Here are some examples of tenant-appropriate incentives:
- Special lease terms. Depending on what details work for you, it’s possible to attract new tenants with special lease terms. For example, say you’re renting out a 10-acre property and the tenant is normally responsible for landscaping and yard maintenance. You may want to adjust the lease terms to provide landscaping and yard maintenance for the first 6 months of a two-year lease.
- Reduce or eliminate administrative fees. You could offer tenants a reduction or elimination of certain fees when they sign a lease with you. For example, you could refund the cost of their application and background check. Background checks are usually less than $50 so it wouldn’t be an expensive refund. You could also eliminate fees associated with key deposits and gym access.
- Eliminate pet rent. Just because you can collect extra money each month per pet doesn’t mean you should. Many tenants shy away from rentals that require pet rent because it doesn’t make much sense. Pets don’t use electricity or water like humans do, and tenants see pet rent as another way for a landlord to make extra money.If you charge pet rent to cover the actual cost of hiring people to pick up poop and fix the landscaping that dogs dig up, you can probably afford to eliminate the fee for a few new tenants. Your existing tenants likely more than cover the cost.You’ll probably get plenty of inquiries by eliminating this controversial fee.
- Offer free parking. If you normally charge for parking, offer free parking at least for half of a renter’s lease term. If you’re renting month-to-month, offer free parking for the first three months, minimum.
- Provide free laundry access. Offer a deal for new tenants to get free laundry for the first two months. To run the special, calculate the cost of doing 3 loads of laundry per week for 8 weeks and offer to provide that amount to your tenant in quarters or cash. Some tenants will want the quarters to use for laundry, while others will be happy to accept the cash. It’s a small, yet enticing discount.
Incentives to avoid
Never offer to reduce or eliminate a tenant’s security deposit. It’s not so much about the money but the mentality behind not having to pay a security deposit.
For example, say your security deposit is normally $600. Any standard incentive might cost you that much (or more). However, allowing people to avoid paying a security deposit can make them feel like they don’t have to be as careful. For instance, when a tenant makes a $600 security deposit, they have “skin in the game” so to speak. There is something at stake for them. They know they’ll lose that money if they destroy the property or don’t pay the rent.
On the other hand, if there’s no promise of a $600 refund at the end of their tenancy, a tenant might not be too concerned with preventing damage. At the end of their tenancy, they might walk away from damages and refuse to pay you for the cost of repairs. If the damage costs less than $500 to fix, you may not be able to take them to court, or it could be more hassle than it’s worth. In that situation, you’ll not only have to pay for the damage, but you’ll have to spend time dealing with it.
The other problem with discounting or eliminating a tenant’s security deposit is you’ll have nothing to use to offset unpaid rent. According to the Texas Property Code, a Texas landlord can deduct unpaid rent from the security deposit. If your tenant skips out on you and doesn’t pay rent – or worse, forces you to evict them – you’re going to lose a lot of money and you’ll have no source from which to recover your costs.
Not sure how to attract new tenants?
If you’re not sure how to attract new tenants, we can help. Our experienced team at Green Residential knows exactly how to attract, screen, and qualify the right tenants for your property.
We are real estate marketing experts who know what tenants want. If you’re tired of struggling with your own marketing, contact us today for a free analysis to see how we can help you attract the kind of tenants you deserve.