Concessions & Move-In Incentives, Revenue Killer or Secret Weapon?

The topic of rent concessions & move-in incentives is quite frankly one of the most polarizing topics amongst leasing professionals & property managers alike. Many who utilize them for closing deals, swear by them, others are vehemently opposed. Very few people in our industry are on the fence about this one.

For some, move-in incentives are always locked and loaded, and a highly utilized piece of their sales toolbox. For others, they are never even considered as an option, and seen as unnecessary cashflow killers. 

Why is this?

If you jump on your local Craigslist housing pages right now, I am almost certain you will find a cornucopia of different property types being advertised for rent with ad titles barking major move-in deals. "First Month Rent-Free, Low Security Deposit, No Application Fee's, $99 move's you in...". The list goes on and on. For some, the use of move-in specials is a huge part of their entire marketing strategy. This is how they drum up leads, and without this sort of marketing tactic, their property inquiry call volumes would suffer drastically.

Those who are opposed to incentive programs often scoff at the notion that they could "give-away" a portion of initial proceeds, in order to finalize a deal. Why would they ever consider doing this, when there are a ton of people out there in their market who do not expect such enticements, and would gladly sign on the dotted line without such prodding. Those opposed deem incentives as completely unnecessary and make it clear that this sort income killer is not something that they will ever make a habit of.

There is validity to both sides of the argument. Both have legitimate concerns, for and against. The key piece of the debate is whether or not one is comfortable with lost property income in trade for a quick and solid deal.

As I see things... 

Personally, whilst understanding the points of contention for those who do not utilize such sales tricks & gimmicks, I do not leave home without incentives locked and loaded in my salesperson toolbox.

However, make no mistake about it, I do not throw move-in deals out to the masses all willy-nilly like.

When utilizing these tricks of the trade, moderation is an absolute must. Also, creativity is paramount.

First and foremost, it should be noted that leaning on the move-in special crutch within your marketing plan, should be avoided in most instances.

If it is lead-volume you are after, before hitting the market with incentives, first do these sometimes overlooked marketing tools:

•  Make sure your property is visually appealing. Curb appeal goes a LONG way in keeping the phones ringing (note: We will be discussing curb appeal further in upcoming posts). Is the landscaping well groomed & the structure well maintained? If not, study where you can cost-effectively improve, and implement property improvements immediately. Groomed landscaping, fresh paint, etc. If the property looks like a place that your prospects would want to call home, they will probably pick up the phone and call you. 

• Signage, Signage, Signage. The quintessential marketing staple...signage. When driving by your property, is it hard for your prospects to miss the fact that there is vacancy for rent, because there is a large (easily readable) sign screaming FOR RENT at their eyeholes? If you property is not on major thoroughfares, do you have "banjo-signs" on local corners, steering those in the market to your front door. If your answer is no, how is the mass market to know that you have vacancy?

• Flood the internet with ads for your property. Craigslist, Facebook, Zillow, are always good places to start. Make appealing ads with lots of pictures & info. Update frequently!!! 

• Make sure your rent price is fair & competitive. This ensures that other competing properties aren't stealing large amounts of your target market.  

If you have implemented the property marketing plan, and you are receiving reasonable-to-great call volumes, then move forward with sales procedures as you typically would...

...but if you have a tough sell, or a fence-rider, do not hesitate to bring in the heavy artillery...

We've all dealt with fence-riders, prospects that are almost sold... a lease deal is just outside of your reach, but then out of the blue it appears that they are beginning to teeter backwards. UH OH...crunch time.

In this situation, to know which tool to fetch from your sales toolbox, it is imperative that you find out what is preventing them from being slayed by the charm of your amazing property. So ask them! Find out what their objections are, and tackle them accordingly.

...Especially in the event that it is rent or utility cost(s) that are preventing them from signing on the dotted line, now you can consider bringing out your concessions & incentives.

But do you just throw on the savings? Slicing away a hundred bucks from the rent price in one sales-adrenaline fueled blow? No. If you are using incentives, you still have to be reasonable & logical. Even if you have been sitting on the vacancy for a long period of time, and you have your first showing in weeks, do NOT "throw in the kitchen sink", out of desperation.

Here's how I utilize incentives such as price drop...

• If I plan on hitting a prospect with a price drop incentive, I typically do it in anywhere from $10 to $50 increments. Depending on the resistance, and the flexibility that I have on the price mark will dictate how low I can comfortably go. For me, $25 is the magic number. I have signed with hundreds of great tenants, who were on the fence, until I dangled the magic $25 per month rent discount at them. For example $600 per month is now $575 per month, and that sounds a whole lot better to most. If they still aren't sold on the price and do not see huge savings in a $25 p/m rent deduction, I hit them with a right hook of basic arithmetic. I usually explain that a rent drop of $25 doesn't sound like a lot, but that it will save them several hundreds of dollars over the course of their lease ($300 over the course of a 12-month lease term). The manner of delivery is almost as important as the raw numbers, flattery is a must! It is a cheesy sales tactic, but it works wonders. Before dropping the price drop on them, explain that you really think that they would make a perfect tenant for your property, and you would be insane to let them walk the door without having signed a lease. Also, in dramatic fashion, let them know that you really aren't able to do it, but you feel that the personally "hit" will be well worth it in exchange for having them as a tenant...then hit them with what you propose as the rent discount/incentive.

For the aforementioned opposition group of leasing professionals who would rather be shot dead than lose out on revenue, I will explain how this sort of thing can be worked to your advantage. First and foremost, as you will often hear me say..."Don't forget your ABC's... Always be closing & Always be creative!". Creativity is the key to proper utilization of move-in incentives & rent rate concessions.

As it relates to "lost income", we have to back up to the point where you are initially pricing units. I personally hyper-inflate my rent rates, arbitrarily, typically somewhere in the ball park of ... you guessed it... $25 dollars. My logic on this is, the additional $25 will rarely break leads from coming in, but removing it will often close deals. If you aren't met with objections, and a deal goes through as planned...boom...additional revenue!!! If you have to "trim the fat", and throw out a $25 rent discount in your meeting with the prospect...guess what? You are just hopping back down to your baseline price (note: next week I will post on how to properly price your unit for marketability & profitability--stay tuned).

Of course there are pro's & con's to utilizing incentives, it really all comes down to creativity, and knowing when to hit them with this sort of secret weapon. But when you need to bring in the heavy artillery, STAY CREATIVE...and drop the BOMB to close that deal!!!