Charlotte Property Management Weekly: When Should Rental Rates be Negotiated?

As a Charlotte-area property manager, we get contacted (usually via e-mail) by prospective tenants asking us if the owner is willing to accept less than the listed rental rate. This question gets asked before the tenant even looks at the rental home.




I guess with the “new normal”, Group-On world we are living in, some might assume that consumers are not willing to look at something that isn’t drastically reduced; I don’t necessarily agree with this. But it does bring up the question: How does a property manager answer such a query on an immediate price reduction? There are obviously two ways to do this.



Question from Prospective Tenant: Will you lower the price even though I haven’t even seen the home and have done nothing besides click the rental ad to e-mail you?



Answer from Property Manager: Yes! How much would you prefer to pay? The list price is merely a starting point for negotiations, my astute friend! Property management’s new business model is akin to the “suggested donation” for entrance into a benefit concert. By the way, all the new chairs in our office are of the “EZ-Fold” style; we sit on them while eating our Burger King “Have It Your Way” Whopper, Jrs.



OR



Answer from Property Manager: No! The listing price is the listing price! I’m offended by your audaciousness, you crooked wretch! In a battle of wills, we will win. Think about it: our downside is that the rental home is on the market for a few more days; your downside is homelessness. The rent has now doubled for you! Scram!



Neither of these is a winning response (caution: do not use these responses at home or the office), but they do cover each end of the spectrum of responses to this “negotiation.” The best answer is somewhere in the middle of this spectrum. But where?



First of all, let’s clarify what a “negotiation” is. A true negotiation is where both sides give something of value and, in turn, receive something in return. In this example, the property manager is giving a discount in rent (real dollars), and the tenant has not even committed to visiting the property (let alone filling out an application and putting down a deposit)!



This example is not a negotiation; it is an example of a fishing expedition. Or a game show called, “How Desperate is the Owner to Rent Out their Property?” So giving away rent money for nothing is an obvious no-go. The best answer to an immediate query about reducing the rent would be something along the lines of, “I’m not sure how the owners would feel about that. If you visit the property and are interested, it is certainly something I could ask them.”



Okay, this does risk alienating some people. However, if the rental price is close to market value, then other renters will materialize. However, if the house has been on the market for a while, this may be a game you want to play. Proceed cautiously so you don’t wind up throwing free lawn care and daily Bojangles biscuits in as well to close the deal.



What about if the tenants do look at the property, are interested, and then try to negotiate the rental price? If the owner is willing to reduce the rent, I think an argument could be made to do this; however, this would be only if the tenants are strong candidates (great credit scores, landlord history, and income). Tenants who pay on time, keep the property in good shape, and do not create problems for others (neighbors, police, and property managers…) are worth their weight in gold. If they do not fit this bill, I would decline any reduction in rent.



Rental rate negotiation may be subjective, but common negotiation rules still apply. Make sure you get when you give! No “quid” without “quo”!



Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)