Understanding Multifamily Lingo : “Rent Concessions”May 01, 2020
Rent Concessions are an example of an "income reducer". Here are examples of Rent Concessions and why they are income reducers!
Rent concessions are what we call an income reducer. Income reducers are those things that bring your report from the gross potential income down to the gross collected rent. Everything in between is what we call an income reducer. Rent concessions are an example of an income reducer. Typically you don't like rent concessions.
There are properties that offer rent concessions but don't report it. I caught somebody doing this one time when I just did a Google search on the address of the property. A Craigslist listing popped up, showing that they're giving away $200 free rent for the first month. I went to the seller, I said, "Hey, you're giving away 200 bucks." He goes, "Yeah, yeah." I said, "It's not showing up in your books." "Oh, it just started doing that. It hasn't caught on yet." But he never disclosed that they were doing rent concessions.
This is very important information. You're going to be looking for this when you're doing the due diligence part.
Here are some examples of rent concessions.
- Free rent for the first month; terrible rent concession.
- Prorated monthly rent, meaning they can knock some money off and they prorate it over time. In other words, you could give you your first month free, but they spread it out over the first three months or something.
- Free Internet and utilities.
- No security deposit; bad one, very bad one, but you see that quite a bit. They'll make it up in what they call the admin fee. Don't fall for that trick.
- No pet fee. This is a great one.
- This one, you see a lot of it at renewal time. If you renew, we will paint an accent wall in your unit. That’s one that we see quite a bit.
- Install new appliances; stay away from that one.
- Waive the parking fee.
These are just some examples of the rent concessions that we get.