Why Rent Specials Can Be a Costly Mistake

If you feel inclined to offer a special in order to get someone in your property, stop and ask yourself: “Is the problem…”

• “…that my rentals aren’t market-ready?”
• “…that my company doesn’t have an established position within the marketplace?”
• “…that my print advertisements are poorly designed (or non-existent)?”
• “…that my online advertisements are poorly designed (or not getting any traffic)?”
• “…that the landscaping/exterior of the properties is clearly uncared-for?”
• “…that the rental office looks ill-maintained, so anyone who see it will assume that the actual rental buildings themselves are similar in status?”
• “…that the rental office is only open on weekdays, during work hours, so many people simply never have time to come in for a talk?
• And so on.

Only if all of the other problems with your marketing and maintenance have been dealt with can a cleverly-designed special have a long-lasting change on your vacancy rates. If you’re using a special to cover up a marketing or maintenance (or other!) failure, it’s only going to get worse for you as time goes by.

To understand why, think about the type of tenants the special will attract. Will it be a tenant who can’t really afford the place without the free rent special — so past due payments eventually increase? Or a tenant who is always looking for a handout and won’t renew their lease without one — thereby increasing your turnovers? Clearly neither of these types is what you really want to attract.

Alternative Offers

That doesn’t mean “don’t offer any specials.” If you’ve got your bases covered from a marketing, maintenance, and customer service perspective, there’s absolutely nothing wrong with offering a modest special offer that doesn’t attract the wrong types of tenants. Think about offering discounts on services that only the right types of tenants would appreciate and could afford to take advantage of, like dry cleaning or organic shopping, etc.

And just so you don’t think we live in Never-Never Land and are out of touch with reality, we do understand that there are properties in locations where a landlord has no choice but to offer specials to fill their vacancies. Often, it’s because all your competitors are offering specials, and your phone won’t ring unless you play the same game. We’ve managed properties like these, so we do understand. In our experience we almost always have more headaches with these “special” tenants, though. We now try to avoid properties like these, where we can’t find a competitive edge to avoid having to follow along.

Read more at biggerpockets.com

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