As the owner of rental property, you should have a contract ready for signing when you put your property on the market. For some applicants, they will happily sign your provided contract without question. For other applicants, you need to be ready to negotiate.
Requesting to negotiate the terms of your rental agreement is a normal part of renting a property. As the property owner, there are several pitfalls that you could potentially fall into.
Rushing
While you may be excited to sign the contract and have a prospective renter move in, you need to be patient. Trying to rush the negotiation process increases the risk for incomplete or unfavorable terms.
Take your time and trust the process. You will end up with a better quality contract in the end. Approach the negotiations by resolving the easier points first. This will create positive momentum for the tougher points later on.
Not Having a Plan
Before you start negotiating, you need to have a plan. Without one, you risk agreeing to give away too many terms. Create a term sheet to have a quick reference sheet that outlines the bigger picture of your rental contract.
Have a clear picture of what terms you’re willing to negotiate on and what terms you aren’t. This way, you can approach negotiations with a clear course of action.
Start by creating your best possible outcome. This should include things like the length of the contract, rental rate, or other terms of the contract. Then decide what the least acceptable outcome is. This would be the bare minimum you would accept for your property.
Not Doing the Math
Don’t let yourself get so tied up in negotiating that you lose sight of the actual numbers. Some property owners get so focused on “winning” the negotiation and lose sight of the end goal. Ultimately, you want to rent out your property for a profit.
As long as the negotiated terms accomplish this, then you win.
Not Being Reasonable
Don’t get greedy. This also means knowing what the rental market standard is. You need to be reasonable both in your contract and in the market.
Trying to have too many demands in your rental contract can cause a potential renter to walk away. Now you’re starting the tenant search all over again, which will cost you more in marketing and applicant screening.
If the tenants do agree to your terms, they won’t be happy about it. Now you’re starting your relationship off on a negative tone. This won’t bode well to your future relationship with the tenant.
A good rule of thumb is to expect your contract to end up somewhere between your best possible and least acceptable scenarios. Your ability to negotiate will determine which end of the scale you’re closer to.
Not Getting Professional Help
One of the biggest mistakes property owners make is to try and go it alone. They can end up being at a disadvantage to experienced renters who may try to benefit from the inequity of experience. As the property owner, you may end up agreeing to terms that are not industry standard or less than favorable to you.
Working with an experienced property management company can provide you with protection and guidance. Their knowledge of the rental market and standard terms will ensure they negotiate a favorable contract for you.
You could also avoid the entire negotiating process by having your property management company do it for you. This is the perfect solution for property owners who don’t have experience with renting out their property or contract negotiation.
Contact our office today and let us help you negotiate your next rental contract.
