Why do prospective tenants try to negotiate rent price?

Question

Well.... I have always noticed that some prospective tenants always try to lowball me on price or ask if it is negotiable. Lately in the winter it has been happening more.  Does this happen to anyone else? How do you react or did you consider it at all? It seems like a bad way to start to "work with them"and mabay their trying to see if you will budge before they are even in the house and how much more they can get away with.

Here a story,  rent was $1075 which is fair and I dropped it to $995 to get it rented out in winter with oil heat which blows heating it(even at 53 degrees). Had a few people offer me $800-850 a month and I laughed. Right now my house is the cheapest and there's not much else out their let alone nothing at this price range.  I have been trying to find someone for 2 weeks and its hard in winter, plus with the holidays....

Just wanted to hear your thought, experience or opinions.

Stephen E. · Answer

@Jesse T. may be right on some moderation on price. A month or two of vacancy in the winter will likely eliminate margins. Having said that on the matter of incentives in general I disagree with the majority of advice on this thread. I have in the past offered last month's rent free in an effort to get a tenant, but that tenant then moved on looking for the next deal. I saw a presentation by an Exec for one of the leading apartment REIT's here and she said that is typical, they have studies that show this incentive seeking behavior out there. There is a class of renter that is just looking for a weak landlord with incentives on offer. They think nothing of moving every 18 months or so to cruise on to the next sweet deal.

I have listened to her and have sworn off the incentives game. My incentive is to have a nice unit. I am careful in acquisitions and only buy clean, sharp units that have been well maintained. I then maintain them very well myself. Many times when prospective tenants see one of my units they say it is the nicest one they have seen in their price range. If they ask for incentives I say the unit is my incentive, and that the money that could have gone to incentives has gone to getting them a nicer unit in which to live. Most of the time they get it. This way the money stays with you in improvements that add value to your property. It makes sense to me.

Richard C. · Answer

Why the heck wouldn't they?  Did you not negotiate when you purchased the building?  There is nothing wrong with them negotiating, it is not them trying to "get away" with something or find a "weak" landlord.  And the same goes for negotiating over terms, which is my problem with about half the responses on that endless, "Stupid things tenant applicants say" thread.

By laughing at an offer that reflects the realities of supply and demand, you have cost yourself a month of vacancy.  Probably 2.  Maybe (hopefully not) more.  That basically swallow the difference between the price you were will to accept and the price you laughed at.

What is "fair" in terms of rent is what the market will bear, right?  And your market, in December, won't bear what you are asking.

Jesse T. · Answer

I would forget about 1075, since it is a slow time of year.  With an asking rent under 1000, i would counter with 925/900 - although I might just reject an 800 offer.  I would probably do a 3-6 month or 15-18 month lease to end up with a vacancy in a better season.

Kent Verge · Answer

Or, as a move-in special, you could offer a discount on the last month's rent of a lease: some percentage off of the last month's rent for a 12-month lease and a larger discount with a longer lease. You could even specify that to qualify for the special, all monthly rent must be paid on time. This ends up as a win/win.

Account Closed · Answer

Oftentimes I will drop the rent (slightly, maybe $25-$50/month) for a longer term lease, especially when the current time frame of say 12 month term would put the lease ending in the winter months.

Another thing you could do is keep the rent at the current amount but give a move in special for the move in month. For example I have a couple rentals right now we're marketing for $100 move in special in December. The rent is the usual amount starting Jan 1st and I always get a full deposit (no specials on the deposit) and of course the tenant(s) has to qualify as usual but this is another way to get a qualified tenant in place in the winter. It's also a 12 month lease (Jan 1 - Dec 31 2015). This month is just a move in month special.

Bill P. · Answer

Jimmy S.

There's a lot of good advice here. If this situation was on my doorstep, I would do the following:

1) Reduce the price for a year end incentive IF they agree to a 6 month lease or 18 month lease because you have to get your vacancies out of the winter zone. The length would depend on how much of a discount they got. Smaller discount = longer lease.

2) Or reduce the security deposit in lieu of the reduced rent, This decision has to be made the strength of the tenants. Many larger complexes are offer $100 deposits to entice potential residents. Higher monthly is better than higher deposit that you have to give back anyway.

3) Check my market rates for the rental. Things change quickly in this market and if you are behind the curve, the only person you hurt is yourself.

Good luck with your decision.

Roy N. · Answer

Troy,

We do not permit tenants to make any capital improvements to a property.  If you allow a tenant to "put thousands out of his own pocket into fixing it up", then the tenant may be able to claim an equitable position in the property ... giving you a new partner and making it much more difficult to evict them.

Sylvia B. · Answer

Last September we advertized a house for rent for $750. One caller asked if we'd take $300. Uh, no!

Even if I had a $300 rental I wouldn't want to rent to them - I know who they are. [Small towns are great for that.]

Troy Young · Answer

When I have a place about to open up I advertise a 1 day only showing and set the rent at a lot to average market value. I like to get about 10 people/families through and I give them a very basic application.  I let them know that I'm taking offers and plan to accept one by the end of the day. Part of the application I ask them how much are they willing to pay for it and what are they planning on doing to improve the rental. Most will give me a full offer along with cleaning and painting it. I've had one offer me $750 when I was asking for $650. I just accepted $700 for one that I was asking $750 for and turned down at least a dozen offers of $750 because the guy offering $700 was willing to put thousands out of his pocket into fixing it up. We signed a 1 year least so I took a loss of $600 in rent for a gain of a few thousand in property value. Plus if this tenant fixes it up how he wants it he's going to take care of it and not want to move in a year. I love it when people negotiate and throw options my way. I can always say no if I don't agree.

Why do prospective tenants try to negotiate rent price?

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