Advanced Property Management, Part III: Negotiating
Flexibility Isn’t The Most Important Think for a Property Manager…But It’s In the Top Three.
This is going to come as a massive shock to a lot of property managers out there, so brace yourself: most tenants want to pay you what they owe. Most tenants want to be able to work out a fair deal for things like improvements. By and large, the significant majority of tenants have to be convinced that you’re a jerk before they’ll deliberately do something like pay rent late or paint a room without asking.
Yes, there are always exceptions. Believe me: Royal Rose Properties works in Detroit. We really have had tenants who moved in, sold every appliance that the house came with, and disappeared 48 hours later never to be seen again. But treating every subsequent tenant like they’re going to turn into that guy is pretty much exactly the wrong response. That’s why today, we’re writing about the art of negotiation in the property management world — because in the end, negotiating makes you look like the good guy, and if it gets you what you want, who cares if it happens in an unorthodox way?
The Space Between Yes and No
It’s quite easy to assume, when a tenant asks you a question, that the answers are “yes” or “no.” Can they pay rent a day late without paying the late fee? Obviously, the answer to that question is most times “no,” for several very solid reasons.
But what if the question isn’t “Can they,” but rather, “How can they?” If you think about it in terms of “what can they do to accomplish their goal of not paying a late fee,” you can almost certainly come up with a tradeoff that will be more valuable to you than the late fee would be. For example, with the tenant asking for the late fee waiver above you could negotiate to waive it only if they pay their rent by the first of the month for the next three months instead of waiting until the end of their grace period.
As an example, here’s a list of answers that Royal Rose has given to people who have asked for an upgrade to their rental over the past few years:
- Absolutely not. Sorry, but we’ve had too many bad experiences with waterbeds; we have a strict no-waterbed policy, no negotiations on that one.
- You can do it if you pay for it. That new kitchen faucet you found on Overstock.com really is pretty sweet, but seriously — you want it, buy it, and install it. Yes you can take it with you when you leave. (Or don’t, that’s fine, too.)
- We’ll pay for the materials if you supply the free labor. You want to scrape and repaint the porch railings? Great idea – we’ll either pay for the paint or give you a rent credit as long as you do a decently-professional job!
- You can do it if you pay for it, but we’ll give you a rent credit. You want to repaint the entire house after living there for 2 years? Sure — that’s the kind of thing we’re not going to pay for up front, so if you pay for the paint, we’ll give you a partial rent credit over the next four months. (Of course, if you move out in the meantime, we’re pocketing the extra.)
- We’ll do it, but the rent will go up if we do. You want central air? Sure — that’s the kind of thing that the next tenant will be willing to pay more for, so we’re up for it…but you’re going to pay for that extra value, too.
- We’ll do it! You want an instant point-of-use hot water heater installed at the shower so you don’t have to wait for hot water? Let’s see…that’ll save us a gallon of water or more every time anyone in your house showers, which means it’ll make up the cost within 2 years…sure! It’s a selling point we can use in the future, it pays for itself within its minimum expected lifespan, and it’s not terribly difficult to install — win/win!
Mastering the art of negotiating with tenants serves everyone’s purposes — it allows you to look like the good guy to the tenant, who sees your efforts at letting them do what they want. It allows you to look good to the owner, who sees you taking unusual efforts to reduce costs. And it allows you to take on challenges that you might not otherwise be able to by exploiting unusual resources in unusual ways.