It’s hard to make sense of the real estate market right now. The rising interest rates that began in 2022 have made mortgages more expensive. And yet home prices in most markets continued to rise, and rents along with them, as demand for homes remained strong into 2023.
Turns out people need places to live even when interest rates go up. Go figure.
Now, though, we’re starting to see rent growth slow and even dipping in some markets. With the rental market nationwide cooling, landlords may need to work a bit harder to attract and retain the best tenants.
But that doesn’t mean you should have to capitulate on your rental prices in a race to the bottom that eats into your profitability. Many landlords instead rely on lease incentives to win over potential tenants, offering renters flexibility and perks while maintaining a healthy return on investment.
To sweeten your offer, try these nine cost-effective ideas for rent incentives to help you attract quality tenants without breaking the bank.
What Are Rent Incentives?
Landlords or real estate owners offer rent incentives, also known as rental concessions or lease incentives, to attract tenants and encourage them to lease a property. These incentives make the property more appealing and competitive in the rental market, enticing potential tenants to choose your particular property over other comparable options.
Rent incentives can benefit both landlords and tenants. Landlords benefit by attracting a larger pool of potential tenants, reducing vacancy periods, and maintaining steady rental cash flow. Tenants can enjoy cost savings, added convenience, and increased value for their rental experience.
Rent incentives play a crucial role in a competitive rental market where tenants have numerous options to choose from. By offering attractive incentives, landlords can differentiate their properties and attract desirable tenants, leading to increased occupancy rates and higher satisfaction among existing tenants.
Common rent incentives include discounts, cash incentives, free amenities, flexible lease terms, or additional services. But some of these types of incentives benefit property owners more than others, and some can get pretty expensive. Let’s zero in on some ideas for incentives that won’t cut too deeply into your returns as a real estate investor.
9 Best Lease Incentive Ideas
The best rent incentives for landlords are those that effectively attract renters without costing you a huge sum in direct expenses or in lost revenue. I mean, sure, if you’re desperate to fill a vacancy, you could offer a month’s rent free or a huge rent discount. That would definitely incentivize renters, but it’d take a huge chunk of change directly out of your bottom line.
We can do better.
There are more cost-effective alternatives that add value to tenants without picking your pocket. The rent incentive ideas below attract potential renters without cutting so deeply into your returns.
1. Offer Flexible Lease Terms
Consider offering flexible lease terms to accommodate tenants’ individual needs. This can include short-term leases or month-to-month agreements, which appeal to tenants with uncertain future plans or those who prefer shorter commitments. Or you can go the other way and offer extended lease periods with marginally discounted rent. Providing flexibility can attract a broader range of tenants.
Unlike most of the other ideas on this list, however, shorter- or longer-term leases can be double-edged swords. Short-term lease agreements can result in more frequent turnover, which carries extra costs. And offering extended leases at a discounted rate can lock you into accepting lower rent payments for longer than you might like—especially given today’s elevated inflation rates.
2. Include a Utility Package
Include utilities such as electricity, water and sewage, or cable and internet packages as part of the monthly rent. This can alleviate the burden of tenants having to set up and manage multiple utility accounts, making your property more appealing. You can negotiate bulk rates with utility providers to reduce costs and still offer an attractive package to tenants.
This incentive works best with utilities that aren’t metered or dependent on the tenants’ rate of usage. For example, if tenants aren’t paying for their own electricity and decide to set their thermostats to 60 degrees all summer, you could end up with a surprise bill. But other utilities like trash collection, landline telephone service, and basic cable TV carry flat and predictable costs regardless of how much your tenants use them.
Real estate investments? Awesome. Being a landlord? Less fun.
Learn how to earn 15-30% on passive real estate investments in one free class.
3. Provide Discounts on Everyday Services
Seek out partnerships with local businesses for discounted services like dry cleaning, grocery delivery, or house cleaning. Think about the kinds of services people use every day and see if you can find a partner nearby who can offer your tenants a discount if you refer them.
These partnerships are well worth a few phone calls to ask around about. They needn’t cost you a dime, provide great deals for your renters on services they’d use anyway, and steer customers toward local businesses. Win-win-win.
4. Reduce the Initial Deposit
Consider reducing the new tenant’s security deposit or the requirement for them to pay the entire first and last months’ rent upfront. You still want to protect yourself, of course, but you can still require a good-faith deposit upfront while offering a little relief for a potential quality tenant about to undergo an expensive move.
You can (and probably should!) be selective about which potential tenants you give this perk, perhaps limiting the offer to new tenants with high credit scores or good referrals.
Just make sure you use standard criteria for making these offers so you aren’t later accused of favoritism or some other nefarious motive. Keep a copy of your written rental application screening standards, along with all received applications so you can prove you didn’t discriminate if a lawsuit-happy renter ever comes after you.
5. Establish a Referral Program
Speaking of good referrals, consider leveraging the power of word-of-mouth marketing by implementing a referral program. Offer your current tenants incentives for referring new tenants to you, such as a cash reward or a discount on rent.
This approach not only encourages tenant loyalty but also helps you find high-quality tenants through trusted recommendations.
6. Enact Pet-Friendly Policies
Any tenants with pets will prioritize pet-friendly properties. Consider reducing or eliminating the pet deposit to attract some of the many renters with furry family members.
This doesn’t mean allowing a pet free-for-all. You can keep your common-sense rules about pets in place and expect your tenants to pay for any damages they cause without forcing new renters to shell out a hefty deposit before Fido even piddles on his first carpet.
Furthermore, adding low-maintenance, pet-friendly amenities like a dog park or walking path can attract a larger pool of tenants while allowing you to maintain reasonable rental pet policy to protect your property.
7. Community Events and Memberships
Partner with local businesses in the area, such as a nearby gym, theater, or museum to offer discounted admission or membership to tenants of your property. Talk to local organizations to see if they can offer your tenants a group rate or a special admission nights. You could even subsidize their memberships as part of the deal, but you don’t have to if you’re on a tight budget.
These offerings build a sense of community and make your property more appealing to prospective tenants.
8. Offer Valuable Upgrades or an Upgrade Allowance
Because your rental properties need updated and renovated from time to time anyway, taking on a new renter can be a great opportunity to provide needed upgrades and improvements as a lease incentive.
Invest in cost-effective technological upgrades that improve the living experience. For example, installing smart thermostats or appliances, keyless entry systems, or providing high-speed internet can attract tech-savvy tenants who value convenience and modern amenities.
Another way to offer potential renters an incentive? Rather than renovating the entire unit before a new tenant moves in, offer an upgrade allowance. Allow tenants to choose their desired upgrades from a menu of options or within an agreed-upon budget. This way, tenants get a personalized space with the improvements they want most, while you complete upgrades you would have needed to make eventually anyway.
9. Provide Free Parking and Storage
If you have available parking spaces or storage units, offer them as complimentary amenities to your renters. Many tenants value the convenience of onsite parking or additional storage space, and offering these perks can make your property stand out without significant financial impact on you.
In a competitive rental market, offering creative and cost-effective rental incentives sets your property apart and attracts desirable tenants.
Offering quality-of-life upgrades like discounted services, free parking, and pet-friendly amenities helps you to create an appealing and smooth rental experience for your tenants without straining your budget. And offering flexibility with your lease terms or security deposit and establishing a valuable referral program will help attract a bigger pool of potential renters.
Successful rental incentives prioritize tenant satisfaction and long-term relationships while ensuring a profitable investment for you as a real estate investor.
When done well, everyone wins.♦
What rental unit incentives have you used successfully in the past? Which rent concessions have you lost money on?
More Real Estate Investing Reads:
About the Author
Jim Cirigliano has more than 15 years of experience writing original content for consumer and business publications in industries including personal finance, construction and manufacturing, nature and outdoors, and science and biotechnology. He operates Spot Check Editorial, which produces world-class content that engages readers and customers.