Apartment Hunting 101: What Are Rent Concessions?
What Are Rent Concessions?
Everyone loves seeing a product on sale, or offered at a good price. Just like consumer items, apartments also offer deals. Real estate professionals call these concessions, and they come in a variety of types.
Sometimes apartment buildings will offer a rent concession, usually ranging from 2 weeks to 3 months free rent. In some cases, they will allow applicants to prorate the concession, essentially spreading the discount out across the months their new lease covers (more on that in the next section).
Some apartments will offer reduced rent prices if an applicant signs a longer-term lease. In most cases, the longer the lease, the better the concession.
In addition to lease length, deals can depend on the type of units available. For instance, Leasing offices will sometimes offer concessions on 1 bedrooms or studios only. If an apartment building has a large supply of 1-bedrooms units, they will most likely apply concessions to them.
A ‘look and lease’ concession is an extremely popular type of deal in which, if a renter applies for the unit within 24 to 48 hours of a tour, the leasing office will waive the admin and application fee. These fees can be expensive, so it’s worth inquiring about. Sometimes a building might also waive other fees, such as pet fees and/or moving fees.
Other unique concessions sometimes pop up, such as allowing a tenant to paint the walls or switch out carpet for hardwood flooring.
Pro tip: Always inquire about concessions because buildings don’t always list them on their websites.
Before you begin your apartment search, know your budget. Read, How Much Should I spend on Rent? Then, if this is your first time renting, learn how to budget after college, and find some tips for first-time renters.
Ways To Take Advantage of Concessions
To Prorate or Not to Prorate?
When a building offers concessions, such as a month of free rent, you might get to choose how to use it. For example, if the rent is $1,500 and you get one month free, the leasing agent may let you pay $0 for the first month, and then $1,500 each month afterwards. Or, they may let you prorate the rent and pay a little less than $1,500 each month.
Some buildings won’t offer the prorated rent option and will only allow you to use the offer to pay $0 for your first month. Therefore, it’s important to ask before submitting your application.
Doing the Math
So, using the example above, if you choose to prorate the rent, how much would you pay each month? For a 12-month lease at $1,500 per month with one month free, you would pay $1,375 a month. This concession could turn an apartment otherwise outside of your price range into a possibility, or, if the place already fits your price range, you could come in under budget and set aside the extra for savings (or a nice meal).
Here’s the formula for prorating rent: (base rent X total months) – (the concession) divided by the total number of months. Using the previous example, it would look like ($1,500 X 12 )- $1,500 / 12 = $1,375.
When apartments don’t allow new residents to pay the prorated rent, tenants will often put the free month’s rent aside and use it towards future months. Essentially, that would be self-prorating, which is a great option!
Concessions reached an all-time high during the Coronavirus outbreak. Apartments use concessions when demand is low to incentivize people to act. Just like in the consumer world where sales inspire people to buy products, concessions in real estate lead to a higher number of closed deals.
During the Covid crisis, many people left big cities, such as Chicago and New York City, because they no longer needed to work on-site. Working remotely allowed people to move farther from their cities and ultimately pay cheaper rent. Because of this effect, apartments in cities found themselves dealing with a lot of vacancies. To fill those empty units, many of them offered great concessions, up to 3 months of free rent. Once the apartments started regaining occupancy, concessions slowed.
Because the demand for rentals decreases during the winter months, rent prices usually drop and concessions pop up more often. To save the most money, perform your apartment search in winter.
As peak real estate season settles in during the summer months, rent prices rise and the number of concessions available decrease. However, look-and-lease concessions tend to happen year round, so if you find yourself apartment hunting over the summer, it never hurts to ask a leasing office whether they are offering any concessions.
Time to Move?
Now that you know how to save money with rent concessions, let AptAmigo help you find the perfect apartment. We’ll put together a list with your budget and preferences in mind and schedule your tours for you. Best of all, it’s free! We even pay for your Ubers or Lyfts.
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About the Author: Jake Vanvalkenburg is a Touring Agent at AptAmigo, where he helps clients choose their next dream apartment.