The Wall Street Journal has an article on landlords cutting effective rents: “Landlords Offer Incentives to Stay Put”
In our jobless recovery, some landlords are offering big incentives to retain their tenants.
The national unemployment problem has driven some renters to seek roommates, or move into cheaper quarters. Some are moving in with family.
The national apartment-vacancy rate is now at a 23-year high.
The worst thing for a building or house owner is an empty living space. They can minimize utilities, but mortgage payments and taxes remain in force, and there is less to collect to pay the bills.
When an apartment or house is vacated, it can remain empty for months, exposing it to vandalism, and requiring painting, marketing and commissions to attract a new occupant.
Landlords are offering incentives and becoming easier on requirements for occupancy. In a tight market, landlords would deny prospective tenants with living space credit issues like foreclosure or eviction, but in today’s market they are more open-minded.
New tenants on average are paying roughly ten percent less than previous tenants. Renewing tenants are being offered items like free months, waived pet deposits, flat-screen TVs, cash, new carpet, painting, or upgraded appliances.
Landlords generally are not initially offering incentives to renewing tenants. Since tenants can easily check the Internet for comparable rents in their area, landlords will respond to negotiation and many times offer incentives or match rents to renew.
Lower rents nationwide are pressuring house prices as well as the CPI (Consumer Price Index). This will keep inflation down. However, the good news for renters will be offset by more apartment complex defaults, and in turn, losses for small local banks.
So if you are in the market to rent, renew or buy, this is the ideal time to exert pressure on landlords and sellers for concessions.
Don’t be greedy. Negotiation involves both parties calculating how much it will cost the landlord or seller to wait for and attract the next prospect. In the case of landlords, they are losing the rental amount each month. Sellers will have to pay their mortgage payments and taxes until the property is transferred.
It is not taking advantage. It is business.
Rental Vacancy Rates from 1956
Existing Home Sales from 1987
New Home Sales from 1963
Images posted by CalculatedRisk on 11/01/2009
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