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.
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)
|City||1 Bedroom||2 Bedroom|
|New York, NY||$2,795||$4,497
|Los Angeles, CA||$1,400||$1,795
|San Antonio, TX||$542||$695
|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.