Rent Discount

My partner and I will soon be back renting after the sale of our property.

We've found a unit we would like to rent. The asking rent is $250pw. I am considering making an offer of $230pw with rent paid 3 months in advance. The rent has already been dropped by $10 (advertised price was originally $260).

We have a blank application form and will be writing a short cover letter in regards to our situation given the limited rent history (have lived in our PPOR for 3 years).

My questions are:

Would you consider giving this discount as the landlord (8% discount, but with rent 3 months in advance)?

Where would be best to ask for the discount (in the cover letter or just write that amount as an "offer" on the blank rental agreement form)?

Has anyone here who rents or has anyone here as a landlord received/given a discount on rent and how much was it (as a %)?
 
Would you consider giving this discount as the landlord (8% discount, but with rent 3 months in advance)?)

As a landlord I like to receive rent on time and in full each month. Your offer above wouldn't appeal to me at all. I'd be inclined to wait for an application that doesn't try to be clever. If I were to rent the property to you I would wonder what stunt you may pull next.

Where would be best to ask for the discount (in the cover letter or just write that amount as an "offer" on the blank rental agreement form)?

Not a good idea to ask at all. If I received an application from a prospective tenant asking for a discount, I'd wonder why they couldn't afford the asking price. (Especially an applicant with no established rental history. If an applicant happened to include information relating to the sale of their PPOR I'd suspect financial trouble and wouldn't entertain the application at all!)

If the property is currently being marketed too high, the landlord will continue to lower the price to attract quality (read gimmick free) applicants.

Has anyone here who rents or has anyone here as a landlord received/given a discount on rent and how much was it (as a %)?

When one of my IP's is to re re-leased, I spend considerable time researching market rents and instruct my agent to list the property accordingly. Marketing a property too high is just wasting everyone's time, attracts less applicants or more risky ones. (Like your's). Accordingly, I have never had any tenant ask for a discount on rent. Interestingly my managing agent requires 6 weeks rent for the bond. No one has questioned this either.

P.S. May I ask why you sold your PPOR???

Regards Jason.
 
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I don't share Jingo's sentiments.

Sorry Jingo, nothing personal.

Depends on the property a bit. If I was trying to rent an expensive place then I guess I wouldn't be messing around with whether you're paying rent 3 months in advance, because I'd hope your earning enough to cover the rent regardless.

But at the sub $300 per week level, if someone was to offer me 3 months in advance, and then monthly in advance (this bit is important) then I would view that as a decent offer and think about it.
 
I would take a different view depending on the market. If there was a glut of properties and they were getting hard to rent, then I would definately consider it. If, however, rentals are scarce, then I would not entertain it for a minute. I would be wanting the full amount as well as an increase each 6 months if possible.
 
The deal sounds good but once a tenant is in place there is no way of ensuring that the 3 month rental buffer stays in place. You cannot go to tribunal because the tenant is 2 months in advance of their rent. :rolleyes:
 
Thanks for the feedback so far!

If I were to rent the property to you I would wonder what stunt you may pull next.
Interesting that you would consider it a stunt. It's simply an offer, which seems to be quite common in the sale side of property, so curious as to how common it is on the rental side.

Not a good idea to ask at all. If I received an application from a prospective tenant asking for a discount, I'd wonder why they couldn't afford the asking price. (Especially an applicant with no established rental history. If an applicant happened to include information relating to the sale of their PPOR I'd suspect financial trouble and wouldn't entertain the application at all!)

P.S. May I ask why you sold your PPOR???
We will be offering to provide documents showing mortgage payments (on time, every time) at an amount more than twice the asking rent and can show significant other liquid assets and stable job history, good income, etc. Think we can provide enough to show that the decision was not 'financial trouble' based.

As for decision re sale of PPOR. Intention was to subdivide (large block), build duplex when purchased 3 years ago, position to do something of that magnitude was still a few years away, wanted a smaller and more manageable place to live (e.g. no garden), other investment (non housing) opportunities have arisen and don't think property in AUS will do well in the next few years, a bunch of reasons really.

But at the sub $300 per week level, if someone was to offer me 3 months in advance, and then monthly in advance (this bit is important) then I would view that as a decent offer and think about it.

Thanks PI, I'm actually thinking we may offer up to 6 months in advance and will definitely ensure that we are flexible to their preference following the first payment (another bulk payment or monthly in advance would not be out of the question).

Personally I see it as win/win. Landlord gets a nice cash boost up front, tenant gets a discount and neither has to stuff around with ensuring rent is paid/received every couple of weeks...
 
Personally I take the same view as jingo (Jason).

Personally I see it as win/win. Landlord gets a nice cash boost up front,
What am I going to do with that as a LL?:confused: especially if the IP I'm renting to you is cf neutral or a bit neg geared. I'm still up for 6 months of mortgage payments. So the cash has to sit in the bank earning diddy squat so it is ready for the bank to direct debit each month.

tenant gets a discount and neither has to stuff around with ensuring rent is paid/received every couple of weeks...
Receiving rent is only a small (but important - granted) part of the whole IP thing.
There still has to be inspections, tenant selection etc etc.

So to me, your offer does not appeal at all and especially so in a low vacancy rate environment in which we find ourselves. My preference is that you just pay the market rate of rent in full and on time and I get to increase it every 6 months or so as another poster, skater, has pointed out.
 
What am I going to do with that as a LL?:confused: especially if the IP I'm renting to you is cf neutral or a bit neg geared. I'm still up for 6 months of mortgage payments. So the cash has to sit in the bank earning diddy squat so it is ready for the bank to direct debit each month.
I guess if there was a loan on the property it could go into the offset account (assuming the LL had one) reducing the interest paid over the period or maybe it's just the cash injection needed to buy the next one.

Your entitled to your opinion, but I find the whole "what do I do with a lump sum of cash" comment a little bizarre.

I guess I don't have the experience as a landlord so I can only assume but I would think half the worry in regards to renting a place out would be whether the rent is going to be on time and keep coming in every week/fortnight...?
 
Personally, an up front payment would have no benefit to me at all. In fact, it would severely undermine my borrowing capacity.
I need to show the bank rent agreements. The more rent on the agreement, the better in terms of the amount I can borrow.
Offering a discount on rent pw would have a long term effect on my portfolio growth.
Yet, other investors have different objectives and risk profiles. For an investor not looking to grow their portfolio and seeking security and SANF, then maybe rent in advance via a lump sum payment could be attractive.
As Propertunity said, we are in a low vacancy environment. Low vacancy environment rules apply.
I advertised a property for rent recently. Had a flood of applicants wanting it. One of them ticked all the boxes. She also offered $25pw over the advertised rent. In writing. Her application wen to the top of the pile.
She recently sold her home and has quite a lot of cash in hand, following the sale. She doesn't care too much about the weekly rent. What's important to her is the ability to stay in the one place for many years. She wants security of tenure and is willing to pay over the odds to secure that.
Everyone has their own comfort zone, agenda and circumstances. You just need to find out what it is and pitch your proposal to the right person.
 
You just need to find out what it is and pitch your proposal to the right person.
Great post Rob, can really see where you are coming from there.

Can I ask do you rent out the properties yourself or through an agent?

Would love to be in a situation where I can talk directly with the landlord to better gauge their situation and objectives, but given this place has an agent it certainly adds another layer of complexity around getting the important questions answered. I guess I could ask the agent to ask the landlord, but assume I would get a standard response from the agent or if they posed the question to the landlord it would probably come off as somewhat intrusive...

Agree re the low vacancy environment that a discount might be hard to secure, but I think the sign that rent has already been reduced once on this property is a good sign.
 
Can I ask do you rent out the properties yourself or through an agent?

Agree re the low vacancy environment that a discount might be hard to secure, but I think the sign that rent has already been reduced once on this property is a good sign.

Yes, I self manage and run my own open inspections. I rely heavily on my instincts and impressions of people and have yet to have my instincts challenged.

It doesn't hurt to ask the agent to pass on your query. If you don't ask, then you've already given yourself a "no" answer.

The rent reduction may just mean that they are adjusting it to meet the market. It's not an exact science and the renting pool changes constantly as new people come into the pool and others find places to rent. I always start out a little high, then reduce it based on my conversion rate. In other words, if I advertise for, say, $280 pw and get 400 hits on me RE.COM ad in the first few hours, but no enquiries or a few enquiries but nobody showing up to the open, then I know my conversion rate is low and I need to reduce the rent.
I could just leave it as is and wait it out, but each week I'm vacant at that rate is equivalent to $5 pw, so I might as well drop it in the hope of increasing my pool of applicants, giving me a broader selection of tenants.
The point I'm making is that the rent reduction could mean anything from "we are desparate" to "we are trying to find current market rent by starting high and working our way down".

Good luck with your search and negotiations.
 
...... but I find the whole "what do I do with a lump sum of cash" comment a little bizarre. I guess ...... it's just the cash injection needed to buy the next one
Look, I'm not against cash injections, so don't get me wrong. But if a PI did use it as a part cash deposit on another IP, where is he/she going to get the mortgage repayments on this one he's renting cheap to you, for month 2 > 6?

.... I can only assume but I would think half the worry in regards to renting a place out would be whether the rent is going to be on time and keep coming in every week/fortnight...?
Nah, that is the absolute least of a LL's worries. You overcome this risk by taking a 4 week bond, careful tenant selection, a PM who is on the ball to issue breaches if the rent is 1 day over 14 days late and as a last resort buying LL insurance to cover for loss of rent.

Would love to be in a situation where I can talk directly with the landlord to better gauge their situation and objectives, but given this place has an agent it certainly adds another layer of complexity around getting the important questions answered.
LLs hire agents so that don't have to deal with this crap. The last thing a LL wants is to be bothered negotaiting with tenants who put up proposals like this. :p

I understand your desire to negotiate and you're trying for a win/win but you are thinking like a tenant not like a LL investor. I wish you well. :)
 
What happens at the end of the lease?

Does the tenant give three months notice and then pays no rent? Then the LL carries the same risk as any other tenant.

Does the rent stay in advance? The tenant then gives the standard notice period and the LL has to scurry about and find the cash (because it has been spent).

In reality the advanced rent would have to be put aside as it could be called upon anytime once the lease agreement has ended and the LL would have to give it back immediately.

In my opinion the offer of advanced rent may be perceived as a bonus and used as a negotiation tool however in reality is of little benefit to the LL.

If I have to take a reduction in rent because of the market conditions at the time so be it, but I would be making the decision based on the lease terms not on a false benefit.

Regards

Andrew
 
I understand your desire to negotiate and you're trying for a win/win but you are thinking like a tenant not like a LL investor. I wish you well. :)
I'm not sure many tenants would think about how to get a rent reduction, I'm sure most just pay whats asked because they think that's the done thing. I know of a few people that have had increases and they complain about it, but do nothing about it. I've suggested they counter offer the LLs increase with something in-between, most have turned it down as a crazy idea...

It's in my best interests to work a deal that suits me, as it's in the LLs best interest to find one that suits them. End of the day we both need what the other has and we either meet the others deal, somewhere in the middle or we find someone else to deal with.

In reality the advanced rent would have to be put aside as it could be called upon anytime once the lease agreement has ended and the LL would have to give it back immediately.
I'm a little confused by what you are suggesting. The intention would be to take a 12 month lease with rent 3-6 months in advance. So for example we take out the least for 2010, pay for the first 6 months in advance, June comes around we pay the next 6 months. Nov/Dec 2010 we either organise to extend the lease again and pay another lump sum or we move on...I don't see any situation where the LL would have to give any of it back...?

I don't have a great deal of time to find a place so will probably attempt negotiation on one place and see how I go. Will post up the results when I hear back :)
 
If you want to move out early the LL would have to give some of it back. I wouldn't want a lump sum in advance, it would massively screw with my dealings with our fun friends at Centerlink.

I didn't think PMs could cope with rent being paid in advance that far either ... they usually have software set up for fortnightly or monthly.
 
The intention would be to take a 12 month lease with rent 3-6 months in advance. So for example we take out the least for 2010, pay for the first 6 months in advance, June comes around we pay the next 6 months. Nov/Dec 2010 we either organise to extend the lease again and pay another lump sum or we move on...I don't see any situation where the LL would have to give any of it back...?

The way you have interpreted it, the advance period gradually erodes. (i.e. Pay 6 months' worth, and then pay NOTHING for the next 6 months).

The way Bargain Hunter interpreted it, the advance period is sustained by regular rental payments. (i.e. Pay 6 months' worth, then pay rent each week/fortnight so that the rent is ALWAYS 6 months ahead).

In the second case, you'd have to be refunded your 6 months' worth rent at the end of the lease.

I wouldn't take the deal either, unless I was already having trouble finding a tenant.
 
truthfully I just don't see anything in it for the LL, unless they are struggling to get a tenant. Even if you paid the the rent in advance, what is to stop you from asking for it back later (which you as the tenant are entitled to do).
 
Trying to knock down the rent isn't the problem it's the whole proposal that could ring alarm bells.

I would see it as pushy and possibly a little manipulative and be suspicious of someone with no rental history (even if they did show me a morgage repayment history) concoct a plan that involves knocking down the rent. Moreso if they appeared too keen and sure of themselves.

I would feel if I buckled to that then they would think I was a pushover and they would be tempted to ask for more things down the track.

I think your best bet would be to present your very best and try to not appear too desperate for the place and then ask for a small discount.

The rent in advance wouldn't entice me either.
 
I also would wonder why someone who can prove to me that they have made their mortgage payments at twice the rental amount, needs to haggle to knock of another $20 per week from MY income. Especially knowing they probably have a lovely bundle of cash from sale proceeds sitting somewhere earning them interest.

We did have tenants once offer us six or twelve months' rent in advance which we certainly didn't want. It would have given us a big spike in income for that financial year, which would have played havoc with our tax. Centrelink payments also would be stuffed up.

As others have said, it would depend on the tightness of the rental market how I would respond, but as also said, if the market is tight, I would be proactive in making sure I was not asking too much. I would not be happy with a tenant haggling me down like they were at a flea market. And I self-manage.

Last tenant who asked for a discount because they were "prepared" to sign a twelve month lease just made me determined that would not happen. I told him (with a little smile) that he is lucky we were not adding an increase at the six month mark.

I would not like it, and possibly even think "Even if I end up having to reduce it, no way would I rent to these people."

It would get my back up. So if you really like this place, why risk losing it altogether over $20 per week. Of course, you can give it a try, but be prepared to keep looking.
 
So if you really like this place, why risk losing it altogether over $20 per week. Of course, you can give it a try, but be prepared to keep looking.
There is a couple on the radar, I certainly do not have my heart set on a particular place, I just need somewhere that is under x amount to rent, is less than x distance from the amenities we want and will be large enough for our belongings. It's a rental, not a property I'm looking to buy and live in long term.

Not specifically directed at just you wylie, but I find the animosity shown towards a tenant that is looking to make an offer as opposed to paying full price quite amusing. No doubt that many of you that bought your investment properties did so by making an offer under the price asked of the vendor/agent even during a market with lots of buyers, why should the same not be expected in the rental market?
 
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