Wondering, “what is a rent concession?” We have the answers. Whether you’re a renter looking for savings or a landlord looking to attract tenants, knowing the ins-and-outs of rent concessions is a must for accomplishing your goals. In this article, we’ll break down exactly what a rent concession is and how to make the most of one. Let’s get into it.
Main Takeaways
- What is a rent concession? Rent concessions incentivize renters to sign leases through perks like discounted rent, waived fees, or moving cost assistance.
- Renters benefit from rent concessions’ short-term savings, while landlords use them to attract tenants, retain occupancy, and lower turnover.
- Landlords must offer rent concessions to all tenants equally to comply with Fair Housing Laws.
What Is a Rent Concession?
As professionals in Austin property management, we can tell you that a rent concession is an incentive landlords offer to attract tenants. These incentives temporarily lower renters’ costs or offer benefits to make a lease more appealing. For example, some landlords might offer perks like free parking or discounted laundry services for a month. Most commonly, landlords use rent concessions to stand out in competitive rental markets. Still, they also may use them encourage tenants to take long-term leases.
For renters, concessions mean short-term savings, while for landlords, they serve as a strategic tool to maintain steady occupancy and minimize lost income.
7 Common Types of Rent Concessions
Rent concessions come in all shapes and forms. So, we’ve compiled a little list of the most common types of rent concessions landlords make for renters. Here’s an idea of what they might entail:
1. One Month’s Free Rent
Many landlords offer one month of free rent to attract tenants. The benefits for tenants go without saying. That said, the benefits for landlords are more mixed. On one hand, this rent concession helps landlords attract tenants more quickly. However, they have to lose a not-insignificant amount of money in the process. So, offering a discounted rental rate might be a better idea.
2. Discounted Rent
By discounted rent, we mean lowering the monthly rent throughout the lease term, as opposed to a single month. Doing this can be a win-win for tenants and landlords alike. Tenants get a better deal. As for landlords, even if lowering the rent provides slightly less cash flow than they’d get otherwise, it also possibly means a potentially steadier cash flow than they would get otherwise. After all, it’s better to have a tenant who brings in modest income than no tenant at all.
3. Waived Fees
The extra fees attached to renting can really add up. So, putting some of them out of the equation can go a long way towards attracting tenants as a landlord– and lowering renters’ upfront costs. For example, landlords may start a promotion where they waive all new tenants’ application, pet, or amenity fees. This is an easy way landlords reduce renters’ burdens without hurting their own bottom line too much.
4. Discounted or Free Services
Landlords might provide free or discounted services, whether for their own services or ones in the community. For example, they might offer a free month of their parking or laundry services. Or, they might provide an exclusive discount to a gym in town for a year. Another possible perk landlords might throw in could be a free Netflix subscription for, say, 3 months.
5. Move-In Cost Assistance
Needless to say, moving in can be an expensive endeavor. That’s why many landlords might offer new tenants financial support in this process. For example, they might pay for a portion of the renter’s moving container rental costs. This way, renters can worry less about one of the most stressful parts of renting, and landlords can help at a one-time cost to themselves.
6. Free Prorated Rent
Rather than offering a full month of free rent, landlords may choose to cover the prorated rent for tenants who move in partway through the month. Since this amount is less than an entire month’s rent, it minimizes the financial impact on landlords while still providing cost savings for tenants.
7. Reduced or Waived Security Deposit
Some landlords reduce or waive tenants’ security deposit. Although this strategy can be attractive for renters, it also can backfire on landlords. When landlords have an insufficient security deposit, they don’t have a safety net for any property damage or unpaid rent the tenant might make. Instead, they’d have to pay for those damages out of their own pocket.
As a side note for landlords, you have to give all tenants equal access to rent concessions to comply with Fair Housing Laws. If you give one tenant certain benefits, you have to give them all those benefits. For instance, should you want to give a new tenant a moving container rental voucher, you must have a policy in which you give all new tenants those vouchers. This way, you’re not giving anyone differential treatment.
Tax Implications for Landlords and Tenants in Texas
For landlords, rent concessions may reduce their taxable rental income, but the IRS could still require them to report based on full rental value. While landlords can’t deduct waived rent as a business loss, it could possibly be classified as a marketing expense. Also, if they fully waive fees and deposits, those costs typically don’t count as income. That said, landlords should still document the costs to make sure they’re compliant.
As for tenants, rent concessions are (obviously) not taxable income. However, if they’re deducting the rent as a business expense (i.e., a home office), they may need to adjust their deductions based on the actual rent they paid, minus any concessions. So, they should do meticulous record-keeping to adhere to tax regulations.
How Bay Property Management Group Can Help
A rent concession is an incentives landlords use to attract or retain tenants. Some common ones landlords might offer are free or discounted rent or services, waived fees, moving cost assistance, or (not recommended) reduced security deposits. This way, renters can get short-term savings, while landlords can stay competitive.
At Bay Property Management Group, we help landlords develop rent concessions that boost their occupancy–without sacrificing their revenue. In addition, we can help tenants find homes that meet their budget needs so they can get housing without breaking the bank. Contact us or look at our listings today to learn how our expert property management services can simplify your rental experience.
