Should You Offer a Deal to Find New Tenants for Your Baltimore, MD, Rental Property?

Reducing turnover time is often a high priority for landlords. The longer properties remain empty, the higher the amount of lost rental income, as well as an increase in maintenance costs associated with an empty property and ongoing management responsibility.

With the high vacancy rates in a competitive rental market like Baltimore, some landlords are using incentives to fill their available rental units quickly by offering deals and reductions on certain service fees. Examples include lower security deposits, rental discounts, moving costs assistance, and varying lease periods.

In this article, American Realty and Management will provide some useful tips on how to offer a deal to find new tenants for your Baltimore property.

Familiarize Yourself With the Baltimore Rental Market

Landlords should educate themselves about the rental environment in Baltimore before implementing tenant incentive programs. Baltimore’s housing market can provide housing for a variety of different types of tenants and a wide range of different kinds of properties.

The level of demand will vary greatly by neighborhood and should be considered based on numerous factors such as pricing, condition of the property, and proximity to employers or public transportation.

Specific neighborhoods within Baltimore are particularly attractive to tenants, including students, healthcare workers, and professionals, while others may appeal more to military-affiliated renters. Because different neighborhoods in Baltimore have different characteristics, the strategy that works in one neighborhood may not necessarily translate into success in another.

For example, some of the more desirable areas with low vacancy rates may not require much in the way of promotional effort to attract tenants, while properties that compete more heavily with other available rental units, or have slower seasonal occupancy patterns, may profit from carefully crafted incentive programs. Understanding the local market is critical. Landlords need to understand their local competitors prior to assuming that they must offer a deal of some sort.

Why Landlords Might Choose to Offer Incentives

Landlords are also under financial stress when their units remain vacant. While a rental unit is sitting unused, there are many costs associated with the property that continue to accrue. These costs include: mortgage payments, insurance, property taxes, utilities, maintenance, and management expenses.

Although these continued expenses can create stress for landlords, many seek to implement incentives to lessen their vacancy time. Typical reasons include faster filling of a property, standing out in competitive markets, more inquiries, extended vacancy costs being outweighed by an incentive, and increasing likelihood that tenants will lease during slow months. In most instances, one month of vacancy can cost more than providing a modest incentive to the tenant.

Incentives Offered by Baltimore Landlords

While many incentives are similar in that they are offers of a reduced cost, not all promotional strategies are equal. The following examples of promotional strategies would generally provide the highest return on profit.

1. Reduce First Month's Rent

This promotional strategy, often referred to as a “first month off rental”, is one of the most common promotions. Examples of variations include half the amount of the first month's rent may be applied to the rent, a reduced (lower than normal) move-in cost, and an extended rental agreement with a prorated discount applied. This strategy may assist in lowering tenant move-in costs and thus increase the chance of a prospective tenant committing to a particular unit.

2. Decreased Security Deposits

For many prospective tenants, the cost of a security deposit is a hindrance when renting. You should offer flexible/decreased amount options to encourage rental inquiries. However, keep in mind that lower security deposits leave you more exposed to potential costs associated with property damage. Therefore, risk assessment remains critical.

3. Free Amenities

Rather than decreasing rent, consider offering your tenant a free amenity. Don’t just think of it as something nice. Instead, consider these amenities as beneficial in maintaining rent value while also pleasing your customers.

Some common options for “free” amenities include free parking, free storage access, waived pet fees, and free internet service for a fixed period. Remember that many consumers will appreciate convenience more than simply offering them a discount.

4. Flexible Lease Terms

By providing flexible leasing options (i.e., short-term leases), you will likely attract a wider range of applicants than using a traditional lease structure. Examples of lease flexibility include short-term leases, flexibility of lease-to-lease dates, and renewal incentives.

5. Bonus Referrals

Existing tenants can act as excellent marketing partners. When a current tenant sends in a qualified potential new tenant, offer that tenant an incentive. When happy tenants refer to new potential tenants, they usually know someone else with similar lifestyles and expectations. Therefore, it is likely that these referrals will provide good-quality applicants.

When It’s Appropriate to Provide Incentives

Although not always necessary, promotions for rentals can be beneficial in some situations:

• High Vacancy Periods: If you have been experiencing a high vacancy rate for a property for an extended period, offering promotional incentives can increase visibility and can create a sense of urgency with the potential renter. The cost of offering modestly priced promotional incentives is likely less than the long-term cost of continuing to pay vacancy costs.
• Seasonal Slowdowns: Another time when promotions may be advantageous is during slower rental seasons. Rental markets go through peaks and valleys throughout the year. It is very possible that leasing activity may be slower than usual due, in part, to the time of year.
• Strong Competition: If the rental market is experiencing strong competition in the area, and comparable rental units have similar features at similar rental rates, then providing a promotional incentive may help set your rental unit apart from those of the competition.
• Newly Renovated Homes Wanting to Build Momentum: For newly renovated homes or new rental listings, temporary incentives can be an initial way to get leasing activity and build a positive rental experience.

Bottom Line

Sometimes, offering a deal to help fill a vacant rental property with a new tenant is one way to find new tenants for rental properties in Baltimore. However, the decision must be made after careful consideration. Utilizing incentives as part of your strategy may give you shorter lease periods, draw attention in a competitive market, and aid in building your leasing momentum.

If you're looking to reduce vacancy time and maximize the return on your Baltimore rental property, the team at American Realty and Management can help. Contact American Realty and Management today to learn how we can support your rental property goals.