SS271: Strategic Concessions: When They Help and When They Hurt Your Bottom Line

  • March 1, 2026
  • Rokon Ahmed
  • Strategy Saturday
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SS271: Strategic Concessions: When They Help and When They Hurt Your Bottom Line

Concessions can be extremely beneficial to property managers, helping them rent more apartments when crafted correctly. In this episode, charles discusses offering concessions to new tenants.

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Talking Points:

  • In competitive multifamily markets, concessions are a common leasing tool. These concessions can include free rent, waived fees, and various move-in specials to help boost occupancy. Concessions can be helpful in many situations, but can also hurt your bottom line and NOI when used incorrectly. I personally never utilized a concession when renting any of our apartments until we syndicated our first apartment complex in Tampa. Up until that point, we were just leasing apartments and requiring a month’s security deposit and the first month’s rent upfront. When we started buying larger Florida apartment complexes, the property managers explained that concessions are very common, so we began using them.
  • When Concessions Help Your Bottom Line
    • Lease Up Stabilization. After a new construction project is complete, or during and after a value-add renovation, these are prime times to offer concessions. This is mainly because you are looking to refinance the property and need the occupancy and NOI to meet certain targets; concessions can help.
    • Seasonal Slowdowns. During the slow leasing seasons, when it is cold or during the holiday season, offer concessions to get people in. I might offer concessions in the fall in order to fill units before the winter slowdown.
    • Competitive Market Pressure. If neighboring properties are offering concessions, it might almost be a requirement. This can be a slippery slope, but if, on renewal, your asking rents are lower than your competitors’, the concessions could be very helpful in the long term.
    • High Value – Low-Cost Concessions. Offering a free month of storage at a local self-storage complex or a free moving truck can cost the property manager less than $100, and possibly a fraction of that if you cut a deal with the provider beforehand. Other concessions could be waived fees, free special parking, and free internet (if your building has an exclusive internet contract).
  • When Concessions Can Hurt Your Bottom Line
    • Masking Overpricing. If an apartment complex consistently rents apartments on its website for $2,000 a month, then offers a free month and possibly another free month on renewal, it shows that the apartment is only worth $1,800. They are just hoping that tenants will stay past the concession burn-off and waiting for market rents to increase.
    • Creating a Renewal Issue. Heavy upfront concessions, like 2 months of free rent, discounted this and free this, make renewals at the asking rent very difficult. You eroded the value so much that you need to wean the tenant off the concessions for any hope of burning them off. 
    • Ongoing Rent Loss Compounds. Free months of rent hit the bottom line very quickly. 1 month of free rent is like a 9% discount on annual rent. Landlords have very tight profit margins; usually, after debt servicing and all expenses, it is around 10%. You have to be very careful and strategic with concessions.
    • Shows Possible Management or Property Distress. I personally don’t like buying properties with many concessions. Concessions are usually a tactic used by sophisticated investors, and when underwriting a property, you need to figure out the actual effective rent per unit being charged, not what the broker says. I see concessions as a property’s actual rents are too high. Usually, you find deals with apartment complexes with mom and pop sellers that have no concessions and below-market rents.
  • How Should You Use Concessions?
    • Track the effective rent versus the asking rent. When evaluating the property’s performance, make sure to calculate the actual effective rent received, not your asking rent. This will indicate the true impact of your concessions.
    • Set beginning and end times. Concessions should be temporary. They should not be a permanent policy. Many property managers make it a permanent policy, but it undermines your property’s value and makes it very difficult to ever achieve your asking rents. If you need concessions in the long term, your asking rent is too high.
    • Test your concessions. Try out concessions during the slow leasing season and then again when you are experiencing a dip in vacancy, and see what the response is.
  • Concessions are neither good nor bad but simply tools that property managers and landlords can utilize to boost the occupancy of their property. The problems with them occur when they are overused, which can severely harm your bottom line.
  • If you would like to learn how to retain excellent tenants, check out episode SS50.

Transcript:

Charles:
What looks like a small concession on just one unit can massively erode your cash flow when applied across an entire apartment complex. Over the past 2 decades, I’ve leased apartments, managed properties, and underwritten real deals where concessions looked harmless… until the numbers told a different story. Welcome to Strategy Saturday! I’m Charles Carillo, and today we’re discussing Strategic Concessions: When They Help and When They Hurt Your Bottom Line. So let’s get started.

Charles:
In competitive multifamily markets, concessions are a common leasing tool. These concessions can include free rent, waived fees, and various movement specials to help boost occupancy. Concessions can be helpful in many situations, but they can also hurt your bottom line. And NOI when used incorrectly, I personally never utilize a concession when renting any of our apartments until we syndicated our first apartment complex in Tampa. Up until that point, we were just leasing apartments and requiring a month security deposit and the first month’s rent upfront, and we started buying larger Florida apartment complexes. The property managers explained that concessions are very common, so we began using them and it was kind of hard not to because all from the neighboring properties were utilizing concessions as well.

Charles:
When concessions help your bottom line, lease up stabilization after a new construction project is complete or during an after a value add renovation. These are prime times to offer concessions. This is mainly because you are looking to refinance the property and you need the occupancy and the NOI to meet certain targets and concessions can help seasonal slowdowns during the slow leasing seasons when it’s cold or during the holiday season. Offering concessions to get people in. I might offer concessions in the fall in order to fill units before the winter slowdown. Competitive market pressure. If neighboring properties are offering concessions, it might almost be a requirement, and this can be a slippery slope, but if on renewal your asking rents are lower than your competitors, the concessions could still be very helpful in the long term, high value, low cost concessions. Offering a free month of storage at a local self-storage complex or a free moving truck can cost the property manager less than a hundred dollars and possibly a fraction of that if they cut a deal with the provider beforehand.

Charles:
Other concessions could be waived. Fees, free special parking, and free internet if your building has an exclusive internet contract. So here’s when concessions can hurt your bottom line masking overpricing. So if an apartment complex consistently rents apartments on its website for $2,000 a month, then offers a free month and possibly another free month on renewal, it shows that the apartment is only worth $1,800. They’re just hoping that tenants will stay past the concession burn off and waiting for market rents to increase creating a renewal issue. Heavy upfront concessions like two months of free rent. Discounted this and free this. Make renewals at the asking rent Very difficult. You eroded the value so much that you need to wean the tenant off the concessions for any hope of ever burning them off. Ongoing rent loss compounds, so free months of rent hit the bottom line very quickly.

Charles:
One month of free rent is like a 9% discount on actual rent. Landlords have very tight profit margins, usually after debt servicing and all expenses. It’s around 10% and you have to be very careful in strategic with concessions, it shows possible management or property distress. I personally don’t like buying properties with many concessions. Concessions are usually a tactic used by sophisticated investors, and when underwriting a property, you need to figure out the actual effective rent per unit being charged, not what the broker says. I see concessions as a property’s actual rents are too high. Usually you’ll find deals with apartment complexes with mom and pop sellers that have no concessions and below market rents. How should you use concessions? Track the effective rent versus the asking rent. When evaluating the property’s performance, make sure to calculate the actual effective rent received, not your asking rent.

Charles:
This will indicate the true impact of your concessions set. Beginning and end times concessions should be temporary. They should not be a permanent policy. Many property managers make it a permanent policy, but undermines your property’s value and makes it very difficult to ever achieve your asking rents. If you need concessions in the long term, your asking rent is too high. Test your concessions. Try out concessions during the slow leasing season, and then again when you’re experiencing a dip in vacancy and see what the response is. Concessions are neither good nor bad, but simply tools that property managers and landlords can utilize to boost the occupancy of their property. The problems with them occur when they’re overused, which can severely harm your bottom line. If you’d like to learn how to retain excellent tenants, you can check out Episode SS 50. That’s SS 50 I hope you enjoyed. Please remember to rate, review, subscribe to make comments to potential show topics at globalinvestorspodcast.com. If you’re interested in actively investing in real estate, please check out our courses and mentoring programs at syndicationsuperstars.com. That is syndicationsuperstars.com. Look forward to two more episodes next week. See you then.

Links Mentioned In The Episode:

  • SS50: How To Retain Excellent Tenants

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