Incentives are a great way to generate more interest in a property. If you are in a situation where you need to fill your unit quickly, increasing the appeal of your listing by reducing the rental rate or offering an incentive can help.
Examples of effective incentives include: $500 Move in Bonus, First Month Rent Free, 50% off First Month’s Rent, or smaller incentives such as gift cards.
In general, offering an incentive is preferred over reducing the rental rate because if the tenant remains in the unit after their initial lease term, the yearly rental rate increase will be applied to the higher rent - this effect compounds as the years go by.
For example, let’s compare a rent reduction of $50 vs. a $600 move-in bonus for a unit listed at $2,000, assuming a 2% guideline increase each year.
|
|
Year 1 Revenue |
Year 2 Revenue |
Year 3 Revenue |
Year 4 Revenue |
Year 5 Revenue |
Total Revenue over 5 years |
|
$600 Move-in Bonus |
$23,400 |
$24,480 |
$24,969.60 |
$25,468.99 |
$25,978.37 |
$124,297 |
|
$50 Rent Reduction |
$23,400 |
$23,868 |
$24,345.36 |
$24,832.27 |
$25,328.91 |
$121,775 |
In this scenario, although the income in year 1 is the same, the move-in bonus outperforms the rent reduction by $2,522 over a 5-year period.