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Apartment Loans Secrets
2 min read
by Content Team

Rent Concessions Explained

In this article:
  1. What Are Rent Concessions?
  2. Rent Concessions Vs. Rent Abatements
  3. Related Questions
  4. Get Financing
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What Are Rent Concessions?

A rent concession is an adjustment or discount imposed by a landlord or property manager on the regular rent amount or security deposit fee. Rent concessions are also known as tenant credits, rent discounts, or simply write-offs. These discounts can be temporary or long-term, and generally serve the purpose of either incentivizing tenants to sign or renew leases or as a reduction of costs to the tenant in exchange for the execution of specific services.

In most cases, rent concessions are deployed as a marketing tactic or simply to combat vacancy. Landlords typically offer rent concessions to hook prospective tenants into signing leases in a competitive market atmosphere. Current tenants are also occasionally offered rent concessions by landlords as an incentive to renew a lease agreement rather than end their occupancy.

To better illustrate, one of the most commonly utilized rent concessions is the waiving of the first month’s rent for new tenants. While this may appear to be a big sacrifice to the asset’s income if done often, in reality, the longer a unit sits vacant, the less profit the asset can produce. The understanding being that the sacrifice of a month’s rent is far less than the overall expense of having a vacancy that can take many more months to fill. A similarly popular tactic is offering tenants whose leases are almost up a discounted month or two should they choose to renew.

Rent Concessions Vs. Rent Abatements

Rent concessions often get confused with rent abatements — though the two are deployed for wildly different reasons. In slight similarity to rent concessions, rent abatements are periods of time granted to tenants during which they are not required to pay rent, or must only pay a discounted portion of their rent. That, however, is where the similarities end. Unlike rent concessions, rent abatements are contingent on the property becoming uninhabitable for any number of reasons — most of the time, due to damages caused by natural disasters such as hurricanes, tornados, fires, or floods. If damages to the property are not able to be repaired in a timely manner, rent abatements may be granted up to the full costs of the repairs to the property, and this sometimes also covers the costs of temporary housing.

Related Questions

What are the benefits of rent concessions?

Rent concessions can be beneficial to both landlords and tenants. For landlords, rent concessions can help to attract new tenants and retain existing tenants, reducing vacancy and increasing income. For tenants, rent concessions can provide a cost savings in the form of reduced rent or waived security deposits. Rent concessions can also be used to incentivize tenants to sign or renew leases, or to cover the period in which the property is being built or customized to meet the tenant’s specifications.

What types of rent concessions are available?

Rent concessions are typically granted to tenants at the beginning of a lease to cover the period in which the property is being built or customized to meet the tenant’s specifications. Commonly utilized rent concessions include waiving the first month’s rent for new tenants, offering tenants whose leases are almost up a discounted month or two should they choose to renew, and reduced rent for a set period of time to attract new tenancy.

Source 1
Source 2

How do rent concessions affect a tenant's lease?

Rent concessions can be used to incentivize tenants to sign or renew leases, or as a reduction of costs to the tenant in exchange for the execution of specific services. For example, a landlord may offer a tenant a free month's rent or reduced rent for a set period of time to attract new tenancy. Rent concessions are typically granted to tenants at the beginning of a lease to cover the period in which the property is being built or customized to meet the tenant’s specifications.

Source

What are the risks associated with rent concessions?

Rent concessions can be a great way to attract tenants and fill vacancies, but there are some risks associated with them. For example, if a landlord offers a rent concession to a tenant, they may be unable to raise the rent in the future if the market changes. Additionally, if the tenant does not fulfill their end of the agreement, the landlord may not be able to recoup the lost rent. Finally, if the tenant defaults on their rent, the landlord may not be able to recover the full amount of the concession.

Sources:

  • Rent Concessions Explained
  • Rent Abatement Explained

How can landlords protect themselves when offering rent concessions?

Landlords can protect themselves when offering rent concessions by ensuring that the tenant is aware of the terms of the concession and that the tenant is contractually obligated to fulfill the terms of the lease. This can be done by having the tenant sign a written agreement that outlines the terms of the concession and the tenant's obligations. Additionally, landlords should consider requiring a security deposit or other form of collateral to ensure that the tenant is able to fulfill their obligations. Finally, landlords should consider requiring tenants to provide proof of income or other financial documents to ensure that they are able to make the payments on time.

In this article:
  1. What Are Rent Concessions?
  2. Rent Concessions Vs. Rent Abatements
  3. Related Questions
  4. Get Financing
Tags
  • Rent Concessions
  • Landlord
  • Apartment Property Ownership
  • Multifamily ownership
  • multifamily investing
  • apartment investing

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