Wait what are you talking about? We are not having a concession war yet?
Yet was the key word in that sentence. As the market shifts and now we have some vacant units that are not renting as quickly as we would like. Don’t be surprised to start seeing the signs at the apartment communities. We won’t start the war with the $100 moves you in on approved credit. However, you can get ready for the waiving of credit screening fee’s or reduced deposits.
The reason we try in encourage applicants to rent in our community vs. the competition. So we can waive all kinds of expenses to encourage tenancy at our property. Maybe waive the trash fees, or free pet rent for the first 6 months, a free storage locker, no screening fees, lower deposit etc. I am going to explain the why behind some of the items waived so that you have a better understanding of what you are up against.
The thinking is that if you must lower the rent to get the unit occupied it can damper so many things especially with the state wide rent control, so lowering of other expenses for the applicant will most likely be what happens before the rent is lowered. At least from the perspective of corporate America in California.
Ok let’s talk about lowering the deposit amount because we see so much of that during a concession war. Here is the why that corporate America lowers the security deposit on approved credit. If the applicant has a really strong fico score the chances of them wanting to jeopardize their own credit score is not very high and in a perfect world the deposit is the tenant’s money. So no skin off the landlords nose so to speak. It is a great tool of leverage. I took a $500.00 deposit in the midst of a concession war with a tenant that had a 784 fico score. When they moved out I refunded the $500.00 why because they did everything they should have done. No charges. So by lowering the deposit it didn’t hurt ownership one bit. (Remember to set your oac score in your criteria so there is no question about what that score needs to be to qualify.) In the event the applicant has a 740 fico score and your $500.00 deposit oac (on approved credit) is for a fico of 750 or higher, then you can still approve the applicant with the 740 fico score just at a higher deposit. Rather than denying them…
Now let’s talk about the other side of the fence because nobody wants to talk about this part of a concession war. In the event you have existing tenants that are already in possession of a unit. Let’s says their lease is going to end and they tell you they may want to move and then they apply for a different unit in the same community, Your community? Why would they do this? It is simple they want the concessions that you are offering to new residents. I know your advertisement says for new residents only, the reality is that you cannot discriminate against resident vs. applicant. So you must offer the same concessions to an existing resident if they choose to renew. Please listen to my warning, rather than have this tenant move into the new unit, most of the time it makes more sense from a financial point. To simply offer the concession to the existing resident without requiring them to move. Because in the event they move out then move back in to the new unit, then you are getting another unit rent ready and that can get expensive quickly. Remember fair housing says you must offer all applicants and residents the same concessions.