Sunday, April 19, 2009

Reason #39: How to Negotiate Your Rent

I was recently approached by a friend with the question, “do you think I can negotiate my rent?” Since I have a job in commercial real estate finance, I read daily reports of office rent, hotel rates, condo prices, and apartment rents dropping (even in Manhattan). Right now, it is not only a buyer’s market but a renter’s market as well. Housing prices and rents have dropped due to the surplus of housing and loss of wealth and jobs. Timing is everything, and in the current market, with a little research and courage, you may have the ability to knock down your monthly rent.

First off, the time to negotiate your lease is a few months before your lease expiration. Take advantage of any lead time to complete some research since waiting until the last minute will make the negotiation more difficult. Here are some tips:

Provide comparables. Find out how much a comparable apartment goes for in your neighborhood. Use rent comparison tools like Rentometer or Zilpy to find out how your rent compares with local properties. Look for properties that are similar to yours (similar square footage, location, amenities) that are renting less than you pay now. Provide your landlord with the pages. Zilpy shows the medium rent for various sized apartments, and you can check out the rental price history to see how prices are going up or down in your neighborhood.

Ask your neighbor what they pay. Clearly the best comparison is with another tenant in your complex. Ask your neighbor what they are paying. Is it fair that you may be paying $3000/month while your neighbor is paying $2800/month for the identical 2-bedroom floor plan? Another option is see if your complex is offering discounts to new renters – check out Craigslist or the complex’s site – a price comparison will give you obvious leverage.

Explain why you are an ideal tenant. Do you pay rent on time? Take care of your apartment? Are you quiet and clean? Are you low-maintenance? Toot your horn, and explain that you have an excellent rent payment history or have great credit scores. Make statements such as “I have paid my rent on time every single month for the past four years.” If you are a new to a potential building or complex, have a rental portfolio in hand. Include proof of earnings, credit history and letters of reference. A clean credit history will go a long way in negotiations.

Make a longer commitment. Ask for a reduction in rent for a longer lease if you are planning to stay for more than a year. Ask for $100 less per month for a two year contract. From a landlord’s perspective, the stability of retaining a good tenant with a track record for being reliable is worth the discount. From a renter’s perspective, a two year lease at a lower rate will save you money immediately and protect you from a rent increase after the first year.

Write a letter. Perhaps face-to-face interaction intimidates you or your management company is requesting a letter? Mary Pilon of the Wall Street Journal Wallet Blog wrote a letter to her manager’s office building and was able to reduce her rent by 11%. She even shares a letter form that people can use themselves. Check out the article and letter here.

Remember the worst possible thing to happen when negotiating is the answer no.

Since the large majority of my readers are in the Manhattan rental market, I have added two tables showing the average rental decrease from March 2008 to March 2009 in the Manhattan market.

Manhattan Non-Doorman Rents: March 08’ vs. March 09’
Studios $2,059 (March 08) $1,959 (March 09) -4.84% (Change)
1-Bedrooms $2,792(March 08) $2,624(March 09) -6.03% (Change)
2-Bedrooms $3,858 (March 08) $3,738 (March 09) -3.12% (Change)

Manhattan Doorman Rents: March 08’ vs. March 09’
Studios $2,586(March 08) $2,316(March 09) -10.43% (Change)
1-Bedrooms $3,578(March 08) $3,329(March 09) -6.95% (Change)
2-Bedrooms $5,265 (March 08) $5,129(March 09) -2.59% (Change)

To see just how far rents have – and have not- fallen throughout specific NYC neighborhoods, check out March 2009 Manhattan Rental Market Report so you can see what I analyze all day in my job provide yourself with some market research.
On a different note, take advantage of these deals on Tuesday, April 21:

[rent negotiation]

1 comment:

  1. Great info, thanks! I will make sure my boyfriend sees this b/c his lease will be up soon!