Managing rental properties is often described as a way to generate passive income, but there’s a lot of work involved to make your property successful. One of the biggest challenges to overcome is finding a way to market your property to make it appealing to as many prospective renters as possible; generating ample demand is a way to ensure your property remains occupied while simultaneously pushing the price you can charge higher.
One useful strategy for generating more demand and filling your units quicker is offering rent incentives, sometimes known as lease incentives. These bonuses are exactly what they sound like; they are gifts, rewards, and special perks given to tenants to motivate them to sign a lease.
Rent incentives matter now more than ever. But why is this the case? And which lease incentives or rent incentives are most valuable?
3 Reasons Why Rent Incentives Matter More Now
There are three main reasons why rent incentives matter more now than they did in the past.
- Higher rent prices. First, across the country, rent prices have risen. Property prices have also risen, leading some to claim that there’s currently a housing crisis in the country. With your own rising expenses, it’s not prudent and sometimes not possible to reduce rents and make your property seem more attractive. But in a financially precarious situation, tenants are going to look for any financial edge they can get. If you can offer them even a temporary break or a decent bonus, the rent prices won’t seem so high.
- Competitive markets. Some of the most valuable areas for rental properties have become highly competitive, including in the Houston and Austin area. There are hundreds of individual parties offering units for rent, often in close proximity with each other. When renters have a smorgasbord of units to choose from, even a modest amount of competitive differentiation can help you win.
- Tenant turnover issues. The average annual tenant turnover for an apartment in the United States is 36 percent. In other words, more than a third of your units are going to experience tenant turnover every year. Most landlords know that tenant turnover and vacancies are major issues with profitability, but lease incentives can help reduce turnover and make sure those vacancies are filled quickly when they do happen.
Rent Incentive/Lease Incentive Ideas
So which rent incentives or lease incentives are going to be the most valuable for your operation?
- An immediate cash reward. One of the most straightforward options is to offer an immediate cash reward, or a gift card as a bonus for signing the lease. This is a temporary and small expense, but it might help fence sitters make the final call to sign the lease.
- Temporary rent reductions. You can also offer temporary rent reductions, especially if you’re getting a longer-term lease signed. For example, you can offer six months of rent reduced by $150. It’s a temporary sacrifice of profitability that allows you to secure more consistent cash flow and, hopefully, more consistent occupancy.
- Scheduled upgrades. Anything you can do to make a unit more attractive is going to generate demand for it, but you may not have the time or money to make renovations now. In that scenario, you could offer scheduled upgrades as a rent incentive; a few months into the lease, you can make a significant improvement or upgrade to the apartment, such as adding a garbage disposal or a dishwasher to the kitchen.
- Better parking. Tenants want a safe, convenient place to park, but this isn’t always accessible or free. Another rent incentive you can consider is some improvement to the parking situation; for example, you could waive parking fees or give them a dedicated spot.
- A gift box/basket. A simpler lease incentive could be a gift box or a gift basket, filled with trivial little goodies to put a smile on their face when they move in. This is relatively inexpensive, but it can make a big impact.
- Free internet or other amenities/services. If you’re looking for more consistent, long-term lease incentives, consider offering free internet or other free amenities and services.
- Extra storage space. Another solution is providing your tenants with extra storage space, free of charge or for a relatively small amount of money.
- Waived deposits. In some cases, it makes sense to offer waived deposits as a lease incentive. For example, you might completely waive or reduce the security deposit, or allow a tenant to have pets without a pet deposit. Do understand there’s a significant financial risk in doing this, as deposits provide some measure of financial protection.
- Referral opportunities. The last item on this list is technically a rent incentive, though it functions as more of an incentive for current tenants than incoming ones. The idea is to create a referral program, in which your current tenants get bonuses or freebies in exchange for bringing new people to the area. Whenever you have a new vacancy, alert your existing tenants and let them know there’s an opportunity to earn a referral. If they refer a tenant who successfully rents the vacant unit, they can earn an incentive, such as the other items on this list. Think of it as an inexpensive form of marketing and advertising that doubles as a way to reduce tenant turnover overall; after all, if the neighbors in your building or neighborhood mostly know each other and like each other, they’ll all be less likely to leave.
If you’re looking for more ideas for rent incentives, an Austin property management company can help you. Property managers have experience managing hundreds of units – and they know what makes local tenants happiest.
Better yet, enlist the help of a property management company for all your property management needs, from marketing your properties initially to handling evictions. If you’re ready to learn more about how Green Residential can make your life as a landlord easier, contact us today!