As a landlord, it is in your best interest to find stable, reliable tenants. One of the best ways to do that is by negotiating a mutually satisfactory lease agreement with potential tenants. Learn tips to negotiate a lease agreement to ensure your properties have quality tenants while keeping renters happy.
When to Negotiate
If you struggle to fill an open listing with renters, it may be a good idea to negotiate. Try to identify potential renters who seem like a good match for your open listing. For example, you may have an apartment with a large backyard or a big garage. Potential renters may have a dog and want a space with a backyard, or they may have a hobby that benefits from garage storage — say, motorcycles or woodworking. These people have natural incentives to apply to rent your open apartment. By negotiating with them, you can help tenants get your apartment and protect your interests.
When you can find renters who appreciate the value of your apartment and seem like a good match, then negotiate. It simply is not worth it to negotiate with every potential renter who comes along.
What to Negotiate
Negotiation is a conversation between two parties to try to develop an agreement. As such, negotiation involves knowing where to stand firm and where to be flexible. Before negotiating, consider what concessions you are willing to make to attract the right tenants. Are you willing to reduce the asking rate, and by how much? What concession would tenants need to make to receive a reduction on rent? Are you willing to invest in home improvements, such as repainting or refinishing the floors, or to allow pets?
If you are not willing to concede on something the renter wants, then you must deny the renter’s application. Someone can seem like the perfect fit, but if you are not open to allowing a cat in your apartment, then there is no way to negotiate your differences.
Before a negotiation, think about whether you are willing to evaluate the renter’s point of view. If you are disinclined to do so, then save everyone time by communicating you’re firm in your stance.
Negotiation Tips
Let’s say you are open to negotiate, and want tips on how to do so fairly. The first step is to listen to what potential tenants want and why, then evaluate it. Sticking with the cat example, assume a potential renter has two adult cats and does not wish to re-home them. This person has been a responsible pet owner for years. The candidate seeks a great apartment, but needs a concession from you on pet ownership.
After listening to the reasons why the renter wants a pet allowance, review the reasons why you’ve prohibited pets. Maybe you worry that cats will scratch the floors. Collecting a pet deposit from the renter could offset your worries. Maybe you’ve heard horror stories from other landlords, and do not want anything bad to happen in your apartment. Gently question your assumptions. Would it help if you could speak with a current landlord about the tenant having pets, or receive a letter from a veterinarian? If you think you could allow cats with such proof, request it from the potential tenant.
Draw up an agreement outlining the conditions under which pets are allowed and define any exceptions. For example, you may allow these cats to move in while prohibiting the tenant from getting additional pets, or pet sitting for other cats in your apartment.
Think of negotiation as a conversation between you and prospective tenants, and not a monolog on your part. Ask tenants what they like about your apartment, and really listen to their stated concerns. If your apartment is priced higher than desired, but far nicer than comparable apartments in your area, then tenants may be willing to stretch their budget to enjoy a nice apartment, especially if you offer a concession that benefits them.
When tenants feel grateful for your apartment, they are more likely to take good care of it. Now that you know why it benefits you to negotiate with renters, do so with confidence.
Author bio: Jeff Cronrod is a member of the American Apartment Owners Association board and has more than 40 years of experience as a landlord. Cronrod has owned, rehabbed, developed and managed more than 4,000 rental units throughout the United States.