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What is a Concession? Rental Definition and Examples

The real estate game is a tough one with agents competing against agents and landlords competing for new tenants to keep their buildings full. And, while recently in the hot housing market, it's been easy to keep unit occupancy up, that's not always the case. This is where Concessions come into play. And no, we're not talking about Concession stands that sell your favorite ball game great. We're talking about rent concessions. Here's what you need to know about them before accepting or offering one.

What does a concession mean?

The word of the day today is concession. The word concession has many different meanings, such as concession speech or concession stands, but there are also rental concessions. So, you might wonder what a rental concession is.

A rental concession is typically an adjustment to the original lease in order to attract tenants or keep existing ones. Concessions are anything from not having to pay the first month's rent to a lower security deposit. There are also temporary concessions or long-term ones, depending on the landlord.

Why would a property owner offer rent concessions on their rental property?

Landlords want their rental property occupied because if it's not, it means they're not making any monetary compensation. In order to do this from time to time, they will offer rental concessions.

The purpose of rent concessions is to attract new tenants or entice the current renters to agree to a new lease or stay in their existing lease. While it might sound like they're losing money, a temporary concession is much less than the lack of rental income in the long run.

Concessions are often offered when the market is slow. You won't see them offered in a booming rental market.

What's the difference between a rent concession and a lease?

As mentioned, the point of rental concessions is to keep tenants or find new tenants. They're perks, such as reduced fees or sometimes a physical good granted in order to attract new tenants to the unit the landlord must keep filled.

The tenant needs to sign the lease in order to live in the building. They work together to help a landlord fill their space. All new renters will need to have a lease, but concessions are part of the lease agreement itself.

What is an example of a concession?

When it comes to concessions, the landlord makes the call on what to offer and this can change depending on the property. It could be anything from free parking to reduced rent agreed upon in your lease to even a material item. Here are common examples of concessions that landlords will offer.

Free month's rent

Who wouldn't be excited about the prospect of a free month of rent? This is typically offered as the first month if it's a new renter or the last month if it's an existing renter. Knowing you wouldn't have to pay for a month after leasing is a great benefit for someone moving to a new home. It's also a good way of maintaining occupancy in the building. If it's offered as last month's rent, then the tenants would pay for 11 months and not pay for the 12th.

Moving assistance and costs

We can all agree that moving is stressful. Another example of a concession is offering a moving concession to a future tenant. This can include anything from helping with moving costs, a moving van or even a storage locker for the person moving into a new building.

Lower security deposit

Because moving is pricey enough as it is, a reduced rate on the security deposit is a small gesture that can make leasing and the lease terms more appealing to a tenant. However, landlords should keep in mind that when doing this, there's less to pull from if the apartment needs repairs.

Reduced rent

If a property manager has a space they must fill, sometimes, one of the rental concessions they'll offer is a discount on rent. This is either temporary or long term depending on the lease term.

Landlords will either offer this as a way to get someone moved in or they'll offer it to multi-year contract tenants so they re-sign when their lease expires. This may seem like they're getting less money, however, avoiding the hassle of a unit on the market is worth the reduced price. Once the lease term is up, however, it's up to the landlord and tenant to agree to new terms.

Free amenities

Free amenities are another rent concession possibly offered to a potential tenant. If the property has areas such as gyms, pools, laundry rooms or a parking lot, the landlord would waive the fees or lower the cost for the new tenant.

Upgrades to property

You might also come across rental concession that includes lower-cost upgrades to your future property, such as new appliances or better floors. Make sure that the property follows through on these upgrades before you agree to your lease.

Be cautious with some concessions

Whether you're a landlord, an existing tenant or a prospective tenant, there are things to know when it comes to offering or receiving a concession.

Red flag concessions

If the landlord continuously makes rent concessions to keep the building full, it could be a tip-off to a larger problem going on in the building. If you see this happening, you can act on it by asking your landlord to clarify what's going on. It could save you in the future from paying or signing a lease for a rental property you'll regret.

What to know when offering rent concessions

As a landlord, there are things you should know before offering rent concessions to attract a tenant. When offering temporary ones, keep in mind that tenants could get upset or even angry when you take them away and they have to pay. These can include free parking, reduced rent or access to amenities on the rental property. If the tenant gets frustrated enough, it could result in them looking elsewhere to rent.

As a landlord, it's important to attract tenants to sign a lease and fill a unit. But, you have to think long term, as well. Keep in mind that renting is a business and offering certain concessions can hurt your bottom line. Do some research and reach out to financial advisors to make sure your business doesn't suffer from offering any.

Here are some landlords should know about.

Lease up concession

These are typically used on newly constructed buildings to fill the capacity of the building in order to make a profit.

Marketing concession

This type is often used on older, renovated buildings. The idea is that the apartment itself is slightly above the average market rent but, with the concession, it's brought down to the current standard.

Concessions can help tenants and landlords

Whether you're a tenant, land owner or landlord, there's a time and place for rent concessions. They're a good way to get a new tenant to sign a lease for your property and fill space. They're also beneficial to the tenant because it can mean saving cash when moving. As always, do your research on the property and lease before you act and accept a concession.

The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.

The post What is a Concession? Rental Definition and Examples appeared first on Apartment Living Tips - Apartment Tips from ApartmentGuide.com.



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What is a Concession? Rental Definition and Examples

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