How To Negotiate Your Rent in 2010 | A 10-Step Guide

by

Market Analyst

The National Multi Housing Council recently reported that the U.S. apartment market was "tighter" than it had been at any point in the last four years. A "tight" market is defined as one with low vacancies and high rent increases. The tighter the market is, the harder it is for renters to get good deals.Tightness Index.001

On a scale of 1-100, this chart shows the tightness of the multi family housing industry from 2006 to 2010. The higher the number, the tighter the market is at that time (NHMC).

Tight markets mean it's time for tenants to hone their skills when it comes to negotiating their lease. That means coming to the negotiating table armed with the right information and asking the right questions. To help tenants negotiate a better rate in this tight market, our rental property software experts have put together this handy guide. This guide will help tenants:

  • Determine a fair rental price;
  • Figure out the local demand for rental housing; and,
  • Ask the right questions during negotiations.

Once a tenant determines what amount they're willing to pay, and how desperate the landlord is to keep them, the negotiation can begin.

Have You Successfully Negotiated With A Landlord?
We're curious to hear from those of you who have successfully negotiated with your landlord. How did you do it? What tips and tricks did you learn? Whether you were able to keep your same rent or negotiate an even lower rate, let's hear what you have to say.

Vote in our poll and leave your tips in the comments.

What's A Fair Rental Rate?
One phrase common to nearly every lease negotiation is "market rate." The landlord or property manager will cite the market rate for a particular rental property as cause for an increase in rent.

This market rate may be culled together from the prices of nearby properties or it may simply be a rate that the landlord needs to charge to make a profit. It may also be related to the cost difference in renting v. buying a house in a particular area.

No matter where the rate came from, a tenant needs to treat the "market rate" cited by the landlord as the first step in the negotiation process. It will likely be high but that won't help tenants looking for the fair price.

So how does a tenant know what the actual market rate is? There are a number of resources available, both online and in person, that a tenant can consult to determine the fair market rate of their rental.

Median rent in the United States' ten largest cities (Rent-O-Meter)

City1 Bedroom2 Bedroom
New York, NY$2,795 $4,497
Los Angeles, CA $1,400 $1,795
Chicago, IL$1,200 $1,088
Houston, TX $775 $1,250
Phoenix, AZ $1,048 $775
Philadelphia, PA $1,213 $1,595
San Antonio, TX $542 $695
Dallas, TX $750 $995
San Diego, CA $1,490 $2,200
San Jose, CA$1,238 $1,950

#1. Find out what others are paying. Rent-O-Meter is one of many online resources that will tell tenants if their rent is reasonable based on comparable properties in their city. Web sites such as Craigslist.org and newspaper classifieds are two places that tenants can find specific information about properties in their area. By searching these sites by zip code, a tenant can get a good idea of what the rent is of nearby properties. Neighbors are also a great source of information. They'll know the insider deals, as well as any concessions the landlord typically gives.

#2. Consult the local tenants' council. Many cities have a local tenants' association or council that lobbies for tenant rights. They'll have resources specific to their area, including information about rent increases and even mediation services should a tenant need them. Tenants will also be able to get first hand rental information about certain areas from experts.

#3. Know the trends. One of the oldest sources of online information about apartment living, ApartmentRatings.com, has a database of average rental rates for dozens of cities and towns in the United States. It's called "What The Neighbors Pay." Tenants can use this online resource to see if rents are falling or rising in their area. If the rent has been falling over the last few years in an area, that may be a good point to bring up during negotiations.

What's The Demand Like?
After figuring out a fair rental rate, a tenant will need to figure out what the demand is like for their particular rental property, as well as the demand for surrounding properties. Occupancy rate will influence a landlord greatly in the negotiation process. If they can fill a unit quickly, they may be less inclined to negotiate with tenants.

#4. Take note of vacancies. As the end of a tenant's lease nears, they should take note of the number of vacancies in their complex, as well as how long those units have been vacant. If a landlord has trouble filling their current empty units, it's likely they will have trouble filling a newly empty unit too. A landlord may not care about a $50 a month increase in rent if it risks the possibility of leaving a unit vacant for a month or two.

#5. Check local advertising. If a landlord isn't advertising heavily, or at all, it may mean that they feel confident they can fill their units quickly. On the other hand, if a tenant notices the same Craigslist ad appearing every couple of days, they can assume that the units aren't being filled fast enough.

#6. Choose the right time to renew. Depending on when a tenant's lease is up, they can take advantage of the natural ebb and flow of the rental market. Most property management companies are busiest in the summer months, while demand for rental properties drops off significantly in the winter. Take early advantage of the summer rush by negotiating a new lease in March or April, if possible.

In The Negotiation Room
Once a tenant has figured out what others are paying, the demand for the unit and how desperate the landlord is to rent, it's time to begin the negotiating process. Here are a few handy tips to remember during the negotiating process.

#7. Point out the positives. If a person has been a model tenant, now is the time to mention that. Paying rent on time; having a good credit score; and being a loyal community member are all things a tenant wants to mention during the negotiation process. Landlords know that model tenants can save them money over the long term, even if they aren't able to increase their rent.

#8. Bring the homework. If a landlord's offer is more than the market rate, a tenant can counter with the information they gathered before the negotiation. Having up to date information about what the market actually looks like, as well information about other rental options nearby, puts a tenant in a strong negotiating position. Also, if a tenant is able to cite rates or concessions other tenants received, there is a possibility a landlord will give them the same deal.

#9. Ask for a longer lease. If a landlord won't meet a tenant's offer on a 12-month lease, it's possible the landlord will budge if the tenant is willing to sign a longer lease. A landlord will be motivated by not having to pay for advertising and cleaning up the unit for one more year.

#10. Ask for a trade-off. If a landlord absolutely will not back down from their offer, and the tenant wants to remain in that complex, a trade-off may be a good idea. If the landlord can't meet a tenant's offer, perhaps the landlord can offer another concession, such as free parking. The important thing in the negotiation is to get something out of the deal, even if it's not a lower rate.

Be Prepared To Walk Away
It regularly happens that a tenant and landlord won't be able to arrive at a compromise. In that case, a tenant needs to make sure that they are prepared to leave their residence in a timely fashion. This means having a move out plan, as well as a new place to live. If a landlord realizes you have no alternatives except to remain in your current place, you've lost all negotiating power.

 
  • http://www.rabbitfunds.com Adam@RabbitFunds

    Great line-up. I am looking to go to grad school, so we may be in a rental situation again. So I appreciate the tips.

  • http://www.onemoneydesign.com Jason @ One Money Design

    Chris, wow! I had no idea you could do this. I think these are extremely helpful tips for people, especially since so many are looking to rent after foreclosures. I included you in my roundup tomorrow.

  • http://www.finallygettingtoeven.com finallygettingtoeven.com

    From the landlords point of view:

    I have dozens of properties and we do not negotiate the rent. We set a fixed price and that is what the rent is. It is a fair price within the market and if someone is not willing to pay the rent then they move on.

    Pointing out that you have been a model tenant is not something that will make or break it with us, we expect you to be a model tenant, paying the rent on time, caring for the property, etc. If you are not then we want you to move on.

    The presumption that all landlords are ‘making a killing’ is just no longer true. Our property taxes are through the roof as our insurance rates for non-owner occupied properties. While mortgage rates may be at all time lows for homeowners investors usually do not receive those benefits. We get no exemptions. Our costs across the board are up for repairs & maintenance issues.

    With all that being said we must be doing something right as we stay 100% fully rented and have a waiting list.

  • Steve

    My wife negotiated $50/month off the rent once. It only took a couple minutes. What was great was that near the end of that lease, the complex got bought by another company, who was too overwhelmed at first to raise rents I guess. And the following year they were focused on renovating into a luxury complex. It ended up that that one negotiation saved us $50 a month for 3 years. $1800 in 5 minutes work. Hard to beat.

    I have heard that “we don’t negotiate line” before, from those who (claim to) run multiple apartment complexes. Fair enough, but it doesn’t hurt to ask.

  • Jen

    I too have heard the “we don’t negotiate” line–from the building I live in. Turned out they did, and I saved $100 a month.

  • Tyler

    @Finallygettingtoeven:

    From your standpoint, in your turnover of tenants, do you see an impact of model tenants leaving and poor tenants coming in?

  • Megan

    You wont have much luck negotiating rent with a property management company as you will when you deal directly with the owner. I do agree it never hurts to ask the prospective landlord if they can lower the rent. Also, I have heard of people lowering the monthly costs by paying the first months/last months rent up front then spreading that across the lease to lower the monthly cost. Its not negotiating – but its a way to decrease your monthly costs by paying more upfront.

  • Drew

    We negotiated our rent quite successfully. The tactic we used is to point just how much it would cost the landlord if the apartment were vacant for just one month. We just divided by 12, rounded down a little to be fair, and asked for him to knock that off our monthly rent. We’ve been paying that lower rate for over three years now.

    I imagine negotiating with the owner of a ten unit brownstone is a bit different than the management company of a large complex.

  • http://www.finallygettingtoeven.com finallygettingtoeven.com

    “From your standpoint, in your turnover of tenants, do you see an impact of model tenants leaving and poor tenants coming in?”

    We have our share of both model and poor tenants equally. I will have to say though that as the years progress we are seeing more ‘poor’ tenants than ‘model’. There is a huge shift going on with renters and while 40 years ago there was a lot of pride taken in one’s residence (whether ‘owned’ or rented) we are finding it increasingly more difficult to find individuals that are willing to care for their properties. While i personally have not been in the industry that long i have many mentors that have been doing this 50+ years. Many are getting out because of this. We are hanging in there for a few more years (in fact we are purchasing more homes) but we have really had to pull the reins in and do much more ‘baby sitting’ than we would like.

    Now i realize that there are plenty of good renters out there (i was once one myself) so please don’t misunderstand me to say that all renters are ‘bad’, because that is not the case. We have some wonderful renters. And we treat all our renters with equal respect (until they begin to become a problem) we try to work with them as best as possible but when we come to the conclusion that it is a lost cause then we must break the ties and ask them to move on, sometimes with just a polite request, others with the sheriff standing behind us. Believe me, i have been involved in it all.

    But as said in the earlier post we have a waiting list, so i must not be that bad of a landlord.

  • middle ground

    @finallygettingtoeven: I think the rent you’re offering is more than likely a fair (or even good) value, and hence the waiting list. Demand is higher than supply at your buildings, and that reason is likely a combination of rent price, location and the economy.

    Ultimately, as Drew pointed out, it’s much easier to negotiate a rent downwards the longer a unit has been vacant or available. A landlord looking to rent out an apt for $3K/mth probably won’t negotiate down right away, but if he’s had no applicants or interest after 1-2 weeks, and certainly after a month, he’ll be more likely to accept lower offers.

    Ask and find out how long units have been vacant, and if you like a place but the price is too high, keep it on your list and keep track of whether it’s been rented. If it’s still listed for rent after a week or two, your odds of successfully negotiating rent down – whether it’s a large company or not – improve.

  • http://www.finallygettingtoeven.com finallygettingtoeven.com

    Well yes and no to your response. Actually I have some of the highest rents in my area. (All are single family dwellings, no apartments). There are plenty of properties offering the same s/f as I, with much cheaper rents. However, I offer good clean safe houses that have been rehabbed after each tenant vacates. I have developed a reputation in the county that I care for and will continue to care for my properties and though I might be a little tough on those that don’t share my ideals (meaning some of the tenants) on how a property should be maintained I still have a great referrals from current & former tenants, the city office gives out my name to new residents and so on.

    But I do not rent a property just to have a warm body in it. Just because I have a waiting list at the particular time that a property becomes available does not mean that everyone that is on it is qualified. I do not have the time or inclination to qualify every person that calls and asks for a rental. Their name goes on a list and if and when the time comes that I have an empty I will begin to work my way down the list. Many a time I reach the bottom and I don’t like what I have seen. So I will hold out. I would rather let a property sit empty for a month than just rent to someone for the sake of having it rented. I used to do that, I quickly saw the error of my ways. (However most down time in this case is usually only a week or two, time to run a new ad and start taking calls and showing the properties).

    When someone drives by one of my rentals with a sign in the yard they will see a nicely up kept house with a manicured yard. They will call for a price, they will say ‘ouch’, and I tell them get back with me if you would like to see the interior. They disappear for a few days, check the market, and they are back. If you are one of the 1st callers in this cycle then you got the house, most times I have to tell return callers I am sorry it is already taken. If you have been already looking and know what the market looks like, you take it the 1st time we talk.

    Yes, i am lucky in regards that I can keep my rentals full. I used to think it was because there was a shortage in my area but that is simply not the case. While I am staying fully rented others are sitting on their houses trying to find renters. But I guess you get what you pay for and if you are giving the renters the best you can in the area, they are going to choose yours over ‘less desirable’ neglected properties.

    All in all while I personally don’t deal in the negotiation of rents, i don’t begrudge anyone else from asking. Heck, I would probably even do the same thing.

  • J Johnson

    We are in a real recession as we all know but why isn’t anything being done for the renter. We need a place to live too. There were programs made to help people who are homeowners. Different types of mortgage helping programs. Why isn’t there something for the renters. If you are not very low income, there is no help. I am a working poor who falls in between. There are so many working people like myself and we pay taxes and get no help! We need renters payment programs for the working poor, especially in high cost areas. Please advise if you know of any in the state of Maryland.

  • http://www.venturacountypropertymanagement.com Erik Hansen

    Chris,

    Did your article mention asking the landlord how long the property has been vacant and also if they have any applications in on the property…or if there have been any applications/offers rejected? In this market, it doesn’t hurt to ask. Unfortunately, some owners price their rentals higher in order to accomadate lower offers.

    • http://www.SoftwareAdvice.com Chris Thorman

      @ Erik

      I touched on that when I mentioned to keep an eye out for vacancies.

  • Sam

    finallygettingtoeven.com

    I live in a 200+ luxury apartment complex run by a management company that also manages other large apartments complexes.
    I am a model tenant and when i tried to negotiate the rent after the initial 12 month period, i was told that due to fair housing laws, they had to have the same rental offer to all eligible tenants in the same period and could not negotiate individual apartments. They said they are audited frequently on fair housing laws, etc etc.
    Was wondering if this is true and the fair housing law does prohbit this or a easy excuse?

    • http://www.SoftwareAdvice.com Chris Thorman

      @ Sam

      I believe the Fair Housing Act was designed to prohibit landlords from charging disabled persons more in rent. I have heard the Fair Housing excuse before at other complexes I’ve lived in. However, at my current apartment in Texas, there are at least a dozen different rental rates being charged for the same apartments.

  • Harriet

    We were able to knock $200 off our Los Angeles rent — not a huge savings, but it put us back to where we were when we moved in 6+ years ago, so there’s that.

    The trigger was a vacant apartment in our building that remained empty for 3 months, despite upgrades… oh yeah, and I might have overheard that every single potential tenant tried to bargain down the rent, until it finally rented for about 15% less than originally listed.

    I’m glad we asked. We did ask for more of a discount than we got, but it’s better than nothing. Through instinct or common sense, we hit most of the above points in our appeal, although I actually think Craigslist pricing is slightly inflated — no one wants to publicly acknowledge that they’re not renting at these prices, because in a rent controlled district like ours, the price it rents for becomes the new market level. But judging by the haggling that went on in our building, I think most landlords are settling for 85% of asking rents — or trying to psyche out tenants with “2 months free rent”, which seems like a nice discount, until you realize that it allows the landlord to leave the apartment’s market price way up in 2008 prices, even though 2010 economics dictate a significant decrease.

    (Ah, rent control. I love you, but you do generate the nuttiest behavior on both sides of the equation.)

  • http://www.finallygettingtoeven.com finallygettingtoeven.com

    While I do not know the entire ‘fair housing act laws’ fully I do know that they are designed to protect anyone wishing to rent being denied for any of the following reasons:

    Fair Housing Act
    Title VIII of the Civil Rights Act of 1968 (Fair Housing Act), as amended, prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap persons.

    It also goes on to say:

    also prohibited:
    Set different terms, conditions or privileges for sale or rental of a dwelling

    While I do not deal with complexes of this magnitude this may be where they are able to pull this one off.

    You can find the entire ‘act’ on the internet and then see whether they were just offering an excuse to you.

  • bob

    I negotiated a reduction. When I moved into the share the person who had the lease moved at the end of the lease. I was offered the lease from management which was a whopping 40 percent more. I talked them down to 20 percent but that was still excessive. Several years later I had problems finding anyone to share and had to cover the bill myself. Part of the difficulty had to do with maintenance of the apartment and public areas. I at this point was prepared to move if the rent was not reduced by $200 which I negotiated and got…and most all of which I reduced from the new share’s rent rather than MY having to carry the entire rent myself another month.

  • http://findfinancetoday.com/ house rental agreements

    first two answers are correct; however, if your state has personal property tax along with property tax, unpaid amounts will follow the person too and affix against any other real property you own or purchase.

  • http://findfinancetoday.com/ Georgina Stergios

    In my state, California, if the value of the subject property drops below the assessed amount, the county assessor must lower the assessment. If you are in California, call the assessor immediately because there is an early December cutoff for making the request. I can’t speak for other states.

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