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
 
NEW YORK - March 5, 2021 - PRLog -- Adding up the impact of rent concessions.

When we're faced with a problem at our apartment community, rent concessions are often part of the solution.

Lease Renewals

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

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