After an incredibly strong rental market with demand outpacing supply, many New York landlords now find themselves sitting on empty apartments. Ultimately, the market will correct and rents will drop. But for now, you may be pacing the floors wondering how to fill units without losing money.
“You do not want to drop prices too soon and leave money on the table,” says 5 Arch CEO Shawn Miller. “But you also don’t want empty units. It is a delicate balance, and savvy investors know the pricing secrets that will keep their rentals filled.”
In a highly competitive market like New York City, concessions may entice renters and fill unoccupied units faster. “Concessions soften the blow of high rent and differentiate your offering from others in the neighborhood so you can increase absorption, especially in the luxury market,” says Miller.
At the start of this year, 31 percent of New York City apartments offered rent concessions, nearly double the percentage from January 2016. But rent concessions are not without risk. “Sometimes landlords will let tenants divide a rent discount over 12 months,” says Miller. “But when the lease is up, the tenant can’t afford the higher rent and leaves.”
Rent concessions may wreak havoc with your cash flow, but these creative concessions can entice renters without cutting into your profits.
1. Upgraded Appliances
An updated kitchen is one of the best ways to raise a home’s value, and upgraded appliances can also entice renters. In a tech-savvy neighborhood, you might even consider an IP-connected “smart” refrigerator or washer/dryer.
2. Free Access to Apartment (or Local) Amenities
If your multidwelling unit (MDU) has a pool, party room, or fitness center, consider offering free access for a year. Not only is this a “no cash upfront” concession, but your tenant may like it so much they will be willing to pay the fee to extend their access once the deal runs out.
If your rental portfolio is primarily composed of single family or duplex units, consider offering free membership to a local gym. You may even be able to purchase bulk memberships from the gym owner at discounted rates—after all, you are bringing new customers into the business.
3. Gift Cards
Moving comes with a lot of expenses for renters, from new furniture to eating out as they get settled in. Gift cards to local furniture stores, restaurants, or even grocery stores (to stock the fridge for the first time) can help. Cash in credit card rewards for gift cards that can be used anywhere just like cash, or connect with local business owners to purchase discounted gift cards.
“Once you form relationships with local businesses—which you should be doing as a member of the business community—you may be able to get deals on gift cards. It is a great way to make new tenants feel welcome in the area and support local business owners,” says Miller.
4. Free Storage Space
Most rentals do not come with a lot of extra storage space in New York. If you are renting a smaller apartment, make it more enticing with an offer of a free storage unit for a year.
5. A Trendy TV
A new 4K UHDTV has a lot of appeal and a relatively low sticker price—especially if you have a hook-up with a local electronics store. This offer may work best in starter apartments, where tenants are likely to need everything once they move in. Young millennials and Gen Z renters will be happy to scratch “new TV” off their moving budget.
Do You Really Need Concessions?
Before you go all-out offering new tenants everything and the kitchen sink, decide if it is necessary. “If you are renting in an area that is off the beaten path, away from shopping or subway lines, or in a new building, concessions could pay off,” says Miller. “If you are having trouble filling a vacancy, a one-time concession is usually a smarter financial choice than lowering the rent.”
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