Finding tenants for your rental property can create stress, especially as you review applications and identify the right people to move into your home. Prospective renters could look to negotiate prices, too, adding another layer to the task.
You don’t always have to engage in negotiations because there’s a good chance you’ll have plenty of options. The Washington, D.C., rental market is competitive, so numerous people should be filling out applications and looking to rent your place whenever it’s available as long as it’s in livable condition.
Learning about the negotiation process remains vital, though, in case you encounter a scenario where you have limited options or your ideal tenant wants a lower rate. This guide discusses some situations where negotiations could be necessary and explains how to negotiate rent with your tenants.
Why Negotiating Rent Might Be Necessary
Landlords in D.C. don’t always have to negotiate prices. There’s a good chance you’ll have multiple applicants every time you have a vacancy, assuming you keep the place in acceptable condition, so you can go with the best renter willing to pay full price. There are some scenarios where negotiating might become necessary, though, including the following:
You Don’t Receive Many Applications
You could encounter scenarios where you don’t receive many rental applications when making your investment property available, forcing you to negotiate rental prices with tenants. This situation typically arises when the market goes through a downturn or you’re trying to find renters at a less viable time, like the middle of a month or around the holidays.
You’re Struggling to Retain Tenants
Negotiating rent is advisable if you struggle to keep renters in the unit long-term. One reason for the turnover could be the pricing, as your tenants could look at cheaper options as soon as their leases expire. It might be possible to negotiate lengthier lease terms in exchange for reducing your price during these negotiations, too.
You Need Renters Immediately
Having tenants pay rent every month makes owning an investment property viable. You might have to negotiate rent with prospective tenants if a renter moves out suddenly, leaving you with a vacancy you need to fill immediately. You’ll have to determine if accepting less for rent is a worthwhile trade-off for filling the vacancy quickly.
You won’t always have to engage in negotiations just because tenants want lower rates, as it all depends on your other prospects. Understanding how to negotiate can help you in these scenarios, though, by ensuring you don’t put yourself in a position of weakness.
Six Tips for Negotiating Rent With Your Tenants
Learning how to negotiate rent is vital for landlords as they attempt to make the most of their investments. You’ll have to walk a fine line because you don’t want to undercharge your tenants and end up covering expenses out of your own pocket. Some tips to follow throughout the negotiation process include the following:
1. Understand the Law
You should know your legal responsibilities as a landlord before negotiating with tenants. The Department of Housing and Community Development’s Rental Accommodations Division has limits on rent increases following a vacancy, as you can only charge a new tenant 10% more than the former tenant or bring the rent to the same level as comparable units if you undercharged previous tenants. You’ll want to factor these allowable increases into your negotiations as you begin.
2. Look at the Local Rental Market
Coming up with a rental rate for your unit should involve looking at the D.C. market and determining what similar properties cost tenants. Finding exact matches is challenging, so you’ll want to factor in property type, location, number of bedrooms, number of bathrooms, and in-unit amenities when determining how much to charge. Identifying comparables ensures you understand what the unit is worth on the market, putting you in a stronger position to negotiate.
3. Think of the Season
You might be forced to negotiate if you seek renters at the wrong time of year. People are more likely to move in the summer or fall, creating more competition for rental properties, driving prices upward, and giving you more negotiating power. Looking for renters in the middle of winter could leave you in a challenging position and force you to listen to lower offers, so avoid starting a lease around the holidays if possible.
4. Figure Out if Negotiating Is Worth It
The goal is to have your rental unit earn as much cash flow as possible, so you’ll have to determine whether negotiating the price will create significant losses. Charging less can be worth it in the long run if you find the ideal tenant, though, because you could save on repairs and the time it takes to find new renters if you have to evict. You’ll have to calculate the lowest rent price you can charge while still covering your expenses to ensure the unit doesn’t become a money loser.
5. Walk Away if Necessary
Your rental property ultimately belongs to you, and you have the power to walk away if a potential tenant doesn’t agree to your price. It’s best to avoid rejecting other applicants until you have a signed lease agreement in place in case your negotiations fall apart.
6. Offer Incentives Instead of Price Decreases
A negotiating tactic to remember is offering incentives instead of decreasing your base rent amount. These bonuses could include free utilities, repainting the unit, free parking, or allowing pets. Offering incentives helps ensure your tenants feel like they’ve won something in the negotiation without hurting your bottom line too much.
You don’t have to be an expert negotiator to succeed as a landlord because the process is relatively simple. Understanding how much you need to charge to earn a profit, and weighing the pros and cons of slightly lowering your price, should leave you in an advantageous position as long as you have multiple applicants.
Get Assistance With Your Negotiations
Learning how to negotiate rent is a task that makes some landlords uncomfortable, especially if they find themselves without many applicants. Getting some help with the process can reduce stress and ease your workload as you create steady cash flow through your investment property.
Nomadic Real Estate offers property management services in the metro D.C. area. We can vet, interview, and negotiate with prospective tenants, leaving you with fewer responsibilities. Contact Nomadic Real Estate for more information on how we can make your life as a landlord far more manageable.
