Are Move-in Incentives a Good Strategy?
Do rental incentive really work? If you are going to use move-in incentives, here is my best advice:
Move-in rent reductions. A lot of property owners and managers reduce the first month’s rent as a move-in incentive. I don’t think this is a wise idea. I do not care for the rent reduction incentive, especially if it occurs at the beginning of the lease period. It can send an unintended message to a tenant that you can afford to not receive the full amount of rent under a lease. By sending that message, a tenant may be more likely to approach you for a reduction or release from rental amounts owing later in the lease period. A wiser strategy might be to offer a final rent payment reduction, but this is not likely to encourage a tenant to move into a home.
Gift Certificates. I have used this strategy with limited success. Instead of a rent reduction of say $100, I have given a local grocery supermarket gift certificate, in that amount, as a move-in incentive. I am not convinced it made my property more attractive to move into. I still firmly believe that renting a home, like buying a home, is an emotional decision, based less on price than on how one feels about the layout and offerings of the home. Nevertheless, in a rental market where there are an abundance of available and vacant properties, a move-in grocery gift certificate could tip the scales in favor of your home. I would also consider offering a Home Depot or Lowe’s certificate, or a Bed Bath and Beyond one. Even a restaurant certificate would work in this instance, but I still do not truly believe a move-in incentive, even this one, would cinch the deal if the property is not appealing in the first place.
Rental Negotiation. Being wiling to negotiate the rental rate to lower than is advertised in the listing is probably the most effective move-in incentive. In a market where most rents are priced approximately the same, offering a small, negotiated reduction in order to close the deal makes sense. To renters, $25 to $50 per month represents a large annual savings. Being willing to negotiate can lead to a completed application on the spot, rather than the experience of the tenant leaving to look at other properties, sometimes never returning.
Upgrades to the property. If you were planning to upgrade anyway, this is a good strategy to let a prospective tenant know that you care about the property and that you will be responsible when it comes to maintaining it. It also lets the tenant know that you expect the tenant to take care of the upkeep of the property. If other properties in the area are being updated, you may not attract as many tenants to your property if it is looking outdated and in need of sprucing up. Letting a tenant know that you will be charging the same rent, but would like to upgrade various items while the tenant is occupying the property can help to keep the rental income flowing as you make the repairs. Never promise to make repairs or upgrades you have no intention of making. Make a list of what you will be doing to the property and ask the tenant to sign a copy of the list. This does not apply to items that you are obligated to repair for habitability of the property. Those are legally required before a tenant can move in, or as soon as possible when you become aware of them, after the property is occupied, so check your local ordinances carefully.
Lease Renewal Incentive. This is probably the best tool for property owners, landlords and property managers. Offering a lease renewal incentive ensures an ongoing tenant and a lower risk of vacancy. Any one of the above incentives can work to encourage a lease renewal. Offering a lease renewal bonus of $50 or $100 is common. Again, I don’t care for the rent reduction incentive, but a refund check after the first rent payment under the new lease, or a gift certificate, are great ways to avoid giving the appearance of not requiring full rent payments, while rewarding the tenants you want to keep.
Despite the tools available and the popularity of move-in incentives, I personally have had mixed results when using them. For the most part, they are neither expected, nor required by tenants and occasionally, have had the effect of making a landlord seem somewhat cavalier about rent collection. So, if you are considering this approach, use it carefully and wisely and really get to know the market in which you are renting out properties.