Rent Concession Dollars Add Up, Winston Rowe and Associates
When concessions are few and far between, it doesn't warrant much attention or concern.
By: Winston Rowe and Associates
When we're faced with a problem at our apartment community, rent concessions are often part of the solution.
A long term view considers how will this apartment home be increased in the future. With a deep discount at move in, its challenging to implement increases that will get the rent back on track with the standard market rate. Even when a lease renewal letter, references the discount received during first year lease; excessive rent increases are a challenge.
When the concessions are widespread across most unit types, it affects the overall financial performance of the property.
The apartment listed with a rent of $900, but leased at $750 is not going to generate $10,800 in annual income. Its going to generate $9,000. A loss of $1800. When you are consistently using rent discounts on most apartment leases. The dollars lost add up. Ten apartments with concessions, $18,000. Twenty apartments with concessions, $36,000.
Without a doubt, $9,000 in rent is better that $10,800 in vacancy loss. But there is an accumulating shortfall in the rent revenue every time we authorize a concession on a move in or a renewal.
Winston Rowe and Associates prepared this article. They specialize in due diligence and consulting for commercial real estate investors. Visit them online at https:///www.winstonrowe.com
Winston Rowe and Associates