Any ideas on offering discounts to attract better tenants and are there any limits to types of discounts?

Question

Is it illegal to offer discounts of say, like a $25.00 discount for people who have good credit, discount for having held the same job with the same employer for over a year, a discount for not having any criminal record, discount for being a non-smoker, having a positive non-family related rental history and maybe a commuters discount? I have property which I am just totally bewildered with! My offering of a really cheap rent only attracts those largely on disability who cant afford much more than the average cost of a weeks motel stay. My idea is to advertise it for say $575.00, but then to attract more applicants and perhaps higher quality type renters offer advertised discounts for having those good qualities that all landlords generally seek. If I recieve no feedback that appears negative my plan is to offer a Commuter discount, employment discount, good credit discount, rental history discount and maybe any others I think of which would result back to a highly competitive rent of $375 and $475 which I would hope gets me some long term tenants  like those that I have in neighboring cities with much larger populations. My adverising will be kinda "guerilla tactic to attract the most attention by use of a mobile Bill Board towed on the back of a small boat trailer which I can park for short hourly intervals a few times a week at various street corners in the geographic area of the rental. It is a quadraplex and so if I got a full occupancy then all the effort will have ben worth the gamble.

Marcia Maynard · Answer

@Kenneth Davis I feel your pain. Our market niche is low-income and fixed-income folks and our properties are B properties that were C when we bought them. We strive to provide affordable housing to responsible renters and we post our rental criteria, yet when we advertise at low rates, we get a lot of responses from applicants who won't qualify.

I find your idea intriguing. Reminds me of the "good driver" and "multi-policy" discounts given by the insurance companies.

The difficulty I see is how well the screening tools you use will give you a definitive answer about the applicant's background and status. What happens when that status changes? With rent subject to change... what if you start the "non-smoker" out at a lower rent rate and they turn out to be a "smoker" or take up smoking later? Or the person whose been with the same employer for many years when they began renting and then changes jobs or changes careers later?  If circumstances change and/or as you discover information contrary to what you discovered during applicant screening, what would you do? Rewrite your lease/rental agreement or use an addendum to keep the rent rate current with a tenant's situation which may change over time?

Dawn Anastasi · Answer

I prefer to stay $25-$30 UNDER top market rent because then I get a greater number of applicants, and people tend to stay longer.  As a landlord, you want people to stay longer. Even though I do MTM (month to month) leases, I have people stay for years.

Provide a quality product, for a little bit less, and people won't be able to find anything else to move to that is better for the same or less rent.  So they'll stay.  And stay.  And your vacancy costs will be low.

Mitch Dowler · Answer

Establish written screening criteria and even place it in your ad. This will help keep the felons, sex offenders, and those with poor credit from responding. If the tenant is borderline to meeting your criteria charge a higher security deposit and document the reason. You can also insist on renter's insurance and have your LLC or yourself listed as the additional insures.

I do not allow smoking in my units all, it greatly increases the cost to turn them and remove the foul odors and yellowed walls.

Do beware of any discounts as an employment discount is definitely discriminatory. My screening criteria for credit, criminal record, and sex offender status also helps weed out illegal aliens. I had a property trashed by illegals in Texas when the property management did not do their job.

Account Closed · Answer

I get the thinking here, but would you agree to that?  Landlords can sometime forget they're dealing with people.   You need to think in terms of what you would think was fair.

Would you pay an application fee before you could even see an apartment?

I wouldn't.

I'd want to see if I'm interested - then I would apply.

Unless an applicant has no idea of how things are done in the USA, they probably won't want to let you run their credit checks, etc. before they even know if they want to rent your place.

You can screen a lot of tenants by asking them questions that would be on an official appllication.  Just do them all the same way, and you should be fine.

Steven J. · Answer

I'd like to add to the phone screening process. I'll be managing a building shortly while working a full time job so I know I'll miss calls sometimes. I've got an account with phone.com where I can have that website do a lot of the screening for me. For example, someone calls in and they'll be given a menu: 'Press 1 to hear about the rentals available, Press 2 to connect directly with the property manager, If this is an emergency call 911 and then call your property manager.' If someone presses 1 they will hear about the rentals, the pricing, features, and our criteria. The intent is that they will screen themselves out right away if they don't qualify. They can then leave a message if they are interested or not. If its just a tenant trying to get hold of me they can then Press 2 and the number will go to my cell phone.

has anyone else done this sort of call screening?

Marcia Maynard · Answer

Have you tried doing telephone screening based on your rental criteria and only showing the unit to those who pass your initial screening? That's what we do and it works like a charm. Our Rental Criteria and Tenant Screening Questions are available in the BP File Place under Other Documents, as an example for some ideas.

If a person shares something with you during the screening and application process that shows they won't qualify, thank them for their inquiry, but let them know they don't quality because you require.... (monthly income that is at least $$$)(don't rent to smokers)(don't allow pets)(etc... whatever criteria they don't meet). Use the same rental criteria and same screening questions for everyone. Actually, the phrase I use is...."I'm sorry, we require ___________ and from what you tell me, you don't qualify to rent our apartment/house." If they ask for an exception to policy, I say "That would be very difficult." If they press it, I tell them "No, we are not prepared to do that."

Also, make your smoking policy cover the entire premises, meaning don't allow smoking indoors or outside. We have never rented to a smoker who didn't at some point smoke indoors when the weather turned bad, so our policy covers anywhere on the premises. We also set a hefty violation fee of $50 per occurrence and at three strikes they're out.

Specifically, for people with disabilities... Many people with disabilities have sufficient income to rent, which may be from sources other than earned income. For those on assistance programs ask for verification such as award letters. Social Security Disability Income (SSDI) can be easily verified. You may also want to consider income equivalents, such as food stamps, rent subsidies, and utility subsidies as "income" for the purposes of qualifying. Or accept a qualifier that is less than 3x rent with more security deposit; note, this may or may not be legal depending on your jurisdiction.

Good Luck!

Steve Vaughan · Answer

@Kenneth Davis I like your creativity attempting to attract the higher quality tenant.  I am hesitant, however, to in any way describe the person rather than the property.  Offering discounts for certain 'types' of renters....  you see where this may cause some trouble.

Here's a couple things I have done.  I advertise at the absolute top of market rent (cheap rents tend to attract cheap renters who want to over-occupy your property) but offer a pay on-time in full discount. A discount for  paying by the 3rd rather than a penalty for not paying by the 6th, for instance.

I also offer a future homeowner's equity or down payment credit.  If they buy through me (I'm not an agent, but often have homes available or will find one for them) or one of my affiliate agents, they get a credit equal to, say, 5% of rents paid.  I provide them with a certificate. Future homeowners usually make great renters.

As far as smokers and other non-protected classes you want to avoid, just put NO SMOKERS in your ad in large bold letters.  It's hard to attract the stallions when you got a stable full of donkeys.  I know.   Been trying to transition out of some inherited tenants in a 7-unit for a couple years.  As the turds leave, be patient and replace with quality. The  payoff is huge!   Good luck and great ideas.  Way to think outside the box!

Account Closed · Answer

@Kenneth Davis It sounds like you're having trouble getting your units rented in that market, no matter what the rent amount is.  I agree with others, that you don't want to lower your rent too much, because the good tenants will wonder what's wrong with the place and won't come look at it.  At least that's my experience.  So, you're left with the hopeful bottom of the barrel people.

I am not one to normally suggest a landlord accept Section 8 tenants, but I'm thinking in your case, it might be the answer.  It sounds like there are plenty tenants in your area who would qualify for Section 8, and there are never enough Section 8 landlords.

So, I suggest you look into Section 8 for those units.  You can still have tough criteria for Section 8 tenants - good credit, good rental history, no felons, etc.  And, they'll probably stay long-term because it's so hard to find Section 8 housing.

Plus, between the housing authority and the tenant, you should get full market price for the units.

Just a thought.

Bill Gulley · Answer

Good ideas, but it's me again, you know, the rain on the parade guy.

Be careful with any discount, it will need to be evenly applied, not arbitrary, have standardized cutoff thresholds to meet for discounts advertised. Saying you have qualifying discounts is fine, stating them without full disclosure can end looking like bait and switch if they don't qualify.

Next issue, I suggest you not give any cash rebate or discount that changes the net rent, especially in lower income situations. Section 8, won't allow it, the tenant would be profiting from rents rebated, government programs like food stamps and other assistance programs look to rents in computing some benefits, rebating will end up being a fraud issue.

I mentioned yesterday that a tenant could ask for a discount on rents if they have great credit and higher income as that reduces the owner's risks that are included in market rents. Nothing wrong with taking less for a good risk, but make sure your method is consistent and fair as well as defensible. :)

Any ideas on offering discounts to attract better tenants and are there any limits to types of discounts?

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