LEASE NEGOTIATIONS THAT DRAW ON ALL AVAILABLE INFORMATION TO DRIVE PROFITABILITY.
Proposed rent, level of interest, length of lease, lease start date, and concessions the five main inputs of a lease negotiation. Each of these inputs influences profitability and must be negotiated at the same time.
LEVEL OF INTEREST:
Through the years Boomtown has developed benchmarks and best practices as early indicators for the effectiveness of pricing strategies when marketing homes for rent. If the current price of a home is yielding strong interest, there is less incentive for a property owner to agree to a discount on the advertised rent. The opposite is also true.
LEASE TERM:
Turnovers are the antithesis of a profitable rental property. Longer lease terms are generally preferred by property owners and provide certainty for tenants. Win / win. Turnovers always include “normal wear and tear” expenses that cannot be billed back to previous tenants and deducted from the security deposit. Finally, lost rent is also part of the equation when turning over a property. The lease term should always be part of a negotiation and can help both tenants and the owners achieve their respective goals.
CONCESSIONS:
Lease concessions are an overlay of sorts during the negotiation. Concessions help to achieve a specific goal of the owner (e.g., three-year lease) or the tenant (e.g., new carpet in bedroom) and can be useful to promote tenant satisfaction while improving the owner’s property. In our experience lease concessions have a measurable impact on tenant satisfaction and can be linked to longer total tenant length of stay which results in lower turnover costs and a more profitable property.