How to Negotiate Rent Part 2

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FIRECracker

FIRECracker is a world-travelling early retiree. She used to live in one of the most expensive cities in Canada, but instead of drowning in debt, she rejected home ownership. What resulted was a 7-figure portfolio, which has allowed her and her husband to retire at 31 and travel the world. Their story has been featured on CBC, the Huffington Post, CNBC, BNN, Business Insider, and Yahoo Finance. To date, it is the most shared story in CBC history and their viral video on CBC's On the Money has garnered 4.5 Million views.

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Following my last post on negotiating rent on a new place, here’s how you negotiate rent on your existing place:

Do you pay rent on time? Take good care of your rental? Don’t nitpick on every light bulb that needs to be changed and bombard your landlord with endless demands?

Congrats! You’re a dream tenant. 

Just like employers who value existing employees that they trust, rather than take on new, untested employees that they need to train, landlords value existing trustworthy tenants. 

That’s why you’re more likely to get a discount from your existing landlord, who knows and trusts you, because they don’t want to take on the risk of a new tenant who might destroy their property or stiff them on rent.  

Use this to your advantage.

If you’re using AirBnb and the place is available long term, once your stay is over, you can negotiate a rental deal directly with the landlord. This will save both parties the Airbnb fees. Plus, you already know and trust each other so you don’t need the security of AirBnb holding the money in escrow anymore. This allows you to negotiate a lower rent since they are getting the money directly. But make sure you have a rental agreement signed and spell out exactly what is covered in the rent so there are no misunderstandings. Since AirBnb includes all utilities, furniture, and Wifi, don’t get complacent thinking you’ll get the same deal. You need to explicitly state it when you negotiate. Also, make sure you get the landlord’s contact information before you check out of the AirBnb, or it’ll be gone. 

If you’re on a long term lease, the best time to negotiate with your landlord is winter. You’ll have less competition since it’s harder for your landlord to rent it out during those months. But don’t do it too early or too late, since most leases require 30–60 day notice to terminate.

Here’s how to go about negotiating your existing rental:

Pros and Cons List

The first thing you should do is sit down and make a pros and cons list about your current rental.

For example:

Pros:

• Fantastic location. Walking distance to everything.
• High ceilings and great layout.
• Indoor parking (more valuable in winter)
• Easy going landlord. Reverse-agism is an advantage here. I’ve found that older landlords (55+) who don’t need the money and are just renting out their 2nd property or part of their house for extra income are the ideal landlords. They are willing to give a discount to trustworthy tenants because they don’t want the headaches of dealing with high maintenance people. To them time is worth more than money.

Cons:

• Laundry is in the building rather than en-suite
• Doesn’t have a dishwasher

Keep this list, as you can use the pros to compliment your landlord and the cons to negotiate a discount (we’ll get to the exact script of how to do this later)

Next, search for comparables.

Find Comparables

Make a list of 5-10 rentals that match your criteria and have lower rent than your current place. You can also include bigger places with higher rent.

Here’s a list of sites we use:

US and international:

1. Zillow.com

2. Padmapper.com

3. Zumper.com

4. Facebook Marketplace

6. Craigslist

Canada

1. Zolo.ca (Canadian equivalent of Zillow)

This site is an incredible resource for renters and it’s easy to use. You can put in the # of bedrooms you want, min-max rent, home type (condo, townhouse, house) and see the results in map view (look at all the rentals available in Toronto for under $1700/month!).  Click on a green dot to see each rental in more detail and then “full listing” if you want to know more. 

I also love how they show you the exact address, size, and what’s included (furnished, parking, utilities, etc) in detail. You can also see how long the listing has been up for and how much it’s dropped:

You can also scroll down and see how much other same-sized units in the building are renting for:

Nice! You’re getting the best rent for this type of unit in the whole building 

Also, you can see how much a place like this sells for (so you can calculate the cap rate and thank your landlord for subsidizing your rent):

For a $600K+ condo, Zolo estimates the mortgage to be around $2319/month + $376.54 condo fees, so that’s $2695.54/month already even before property taxes and insurance!  You’re getting it for $1650. That’s a steal! Give your landlord a hug for subsidizing $1045.54+/month of your monthly expenses!

Two downsides to Zolo are that you can’t exclude basement rentals or shared places looking for a roommate. Also, you need to sign up with your e-mail to get access to see all the pictures of the listings. I used an e-mail address I don’t use often and haven’t been spammed so far.

2. Viewit.ca

This site finds rentals with the best value. It’s not the prettiest and isn’t as easy to use as Zolo but it has a good mixture of purpose-built rental apartments and duplex/triplex houses. This is the site where we found our $850/month rental back in 2006. I also like the fact that there’s an option to exclude basement suites. Landlords who list on here also have to pay a fee, so it’s good for weeding out the scammers.

3. Kijiji.ca

This one kinda feels like digging around in the bottom of the discount bin at the thrift-store. Not a lot of bells and whistles and not easy to use, BUT sometimes you can find some real gems (it might just take you a while to find it). Especially if you want something month-to-month or a 2-6 month sublet. You can also find a 1 year lease, like this place for only $1300/month utilities included. Even if you don’t plan on taking the rental, you can use it as a comparable when negotiating with your landlord. 

Offer to Help Your Landlord

If you know your landlord has additional empty units and you have friends or family also looking for rentals, you can sweeten the pot by giving them referrals. That way they’re more incentivized to give you a discount as a “finder’s fee.” If you’re a good tenant, it’ll also be easier for your landlord to trust your referrals, so you could end up getting your friends/family a discount too.

Now that you have your pros & cons list, comparable rentals list, and possibly some referrals, it’s time to negotiate.

Here’s the script we used to negotiate $1700/month rent (utilities, wifi, and parking included) for a place that normally rents for $2000+/month:

“Dear <landlord’s name>,

I’m planning to extend my stay in [city: Toronto]. Your place is great in terms of [pro #1: location] and [pro #2: all the little thoughtful touches that make it super comfortable]. Thanks for being a great landlord.

While looking at different rentals in [city: Toronto], here’s what I’ve found:

1) Comparable #1 
2) Comparable #2
3) Comparable #3

The advantages of these other places are that they have [con#1: dishwashers] and [con#2: en-suite laundry]. The laundry in this building here is all right but I prefer the convenience of not having to leave the unit. That being said, I really like [pro #1: this location]. Would you consider giving me a [$300/month] discount to stay? I’d be happy to pay [$1700/month all inclusive]. I can pay in advance so you can get the rent money right away. Would that work for you?”

Feel free to use this script and do a find and replace of what’s in the square brackets with your particular situation.

Now, you might be wondering how much of a discount you should ask for.

Generally, you’ll want to start with a lower number than what you think you can get, but not so low that it’s insulting. 20-25% is a good place to start so you they can come back to you and you can meet somewhere in the middle, closer to your real target. If you’re a good tenant, they’ll be incentivized to keep you with a discount rather than risk finding a new unknown tenant.

In my case, the 3rd comparable was a bigger, two-bedroom place that was more expensive ($1800) and the 1st comparable is a smaller place that isn’t furnished ($1400), so I took the average ($1800 +$1400)/2 = $1600 and then added $100 for utilities, parking, and wifi, to get $1700. I could’ve low-balled at $1500 but I felt $1700 was reasonable, given the great location (you can save $100-$200 on gas or public transit if the place has a great walking score) and the responsive landlord. Going forward, another thing I could do is offer $1500-$1600/month rent paid upfront for 3-4 months if they’re willing to lower the rent even more for the stability of having a low maintenance, trustworthy, longer-term renter.

Using this script and finding comparables on Zolo, our friends were also able to negotiate $300/month off their Toronto rent when renewing their one-year lease!

Give it a try. In a renter’s market, you have nothing to lose. Just remember, don’t bluff. You need to be flexible and actually be OK with moving if your landlord says no because if they play hardball and you cave, they will know you’re full of crap going forward. If you give the sense that you’re not actually willing to move out of convenience, you lose your negotiating power.

Have you ever been able to negotiate a lower rent? What are your tips?

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