The Free Month Syndrome Part II

So you've researched your market, things are dead, and you feel you have no choice but to offer a rent special, typically the "free month" deal. You are still not completely vulnerable. There are things you can do.

The first thing you must do is be extra vigilant on your screening process. By advertising free rent, you are putting something of a bullseye on you that tells some unscrupulous souls to try and take advantage of you. Free rent also sounds great to people who don't pay their rent like they are supposed to. Dig hard on the background check. Don't forget to require a full month's rent for the deposit (and never, never take checks for the initial rent and deposit - cash, cashier's check or money order only - trust me).

Next, consider whether you have to give away a full month. Try advertising a half month free if you think that might do the trick. There are usually a few days from the time you approve the tenant to when the lease is signed anyway. We allow seven days as a matter of course ("one week free rent" the ad could say, I suppose). Reduce the seven days to one day from approval to sign the lease in this case and then giving away half a month isn't quite as much pain as it sounds.

If that doesn't work and you have to give away a whole month, remember that you are giving something in a business transaction - it's fair for you to ask for something in return. What we ask for is that the tenant guarantee they will fulfill the entire term of the lease. We have a clause written into the lease (as an addendum) which spells this out. If the tenant doesn't stay for the whole lease, they have to pay back the free month they took. It's only fair, really. Initially we tried a prorated formula, where if they stayed, say, for half of the lease then they only had to pay half of the free month back. Eventually I had to ask myself why we even bothered with that, and now it is the simple deal: stay or pay. If it's a 12-month lease and you stay 9 months, then you have to pay the free month back. Period. You will appreciate it when you get some difficult tenant who drives you crazy then and skips out. It also makes life a little harder on the serial tenants who love to skip from free month deal to free month deal every two to four months. So far we have never had an applicant balk at this offer, but we sure have benefited on a few that turned out to be less than desirable (it's a bad feeling when you look back and think "we gave them a free month?" after they've skipped and left the place a mess). Yes, you have to actually find a way to collect the money they owe on the free month when they skip, but that is a subject for other posts.

There is one more thing that can help when you are forced to offer free rent, and have multiple units vacant. The free month's rent doesn't always have to be the first month (in fact it's better if it's not the first month). It can be any month of the lease. So, what we do is list the units included in the offer, and then let people know that the first one to rent gets their first full month free, the second one to rent gets their second month free, and so forth. This tends to get the first unit or two rented pretty quickly as they realize it is "first come, first served". It's also a big help when someone who has the fourth month free skips out after two months - you've not given away the free rent yet. There is one other thing we add to the free rent addendum for these folks as well, which is that the free rent is void if any monthly payments due before it are late. You want to give free rent to good tenants, not late payers. You'll get your rent on time for three months if the fourth month is free in most cases.

Taking these approaches allows us to put our "free month" ad in there to compete with the rest, but it doesn't leave us giving away as much rent to deadbeats, and that's a big deal.