Tag Archives: lease negotiation

What does it take to close a rental deal in real esatate?

‘1)Location 2)Location 3)Location’ is what most people assume Real Estate is all about. I don’t quite think this applies to the residential rental market. Customers liking the apartment is just the 1st step. Beyond this, I’ve observed that the following 4 reasons end up determining if a deal goes through or not.

Disclaimer: This article is written from Bangalore, India. If you’re reading this from some other part of the world, this might not be applicable

1) Customer Profile: A group of guys/girls (normally 4 to 6 in number) employed in the IT/ITES industry is probably the most common demographic of apartment seekers in Bangalore. Many home-owners/landlords don’t prefer this segment of customers and are willing to rent out their property only to family members (I’ve expanded on this point in one of my previous blog posts). I believe that this is the most important parameter in the current rental market. Most landlords will compromise on the other factors to get a good demographic of customers to stay in their property.

2) Rent:  Well, duh. Of course rent is an important factor! The point I’d like to raise is that the rent isn’t set in stone and in most cases, the rent is negotiable to a greater extent than one would imagine. There’s always a perception amongst Indians that rent rates will keep increasing YoY. This is definitely not the case. The rental market shows seasonal variations. While May-June-July sees peak demand and high prices, Nov-Dec-Jan represents the other end of this cycle. The rent for a property will change depending on this. Other factors that’ll give you leverage to negotiate rent include unpainted walls, lack of furnishing, infrastructure of the apartment complex, etc.

3) Date of moving in: The earlier the tenant moves into the house, the earlier the owner gets rent. This is a very important factor in determining the success of a deal. For a ready to move in property, most owners will agree to a sub-prime rent if the tenants are moving in immediately.

4) Security deposit: Bangalore’s rental market works differently. It’s probably the only city where the owners demand 10 months rent security deposit prior to tenants moving in. While most deals close for 6-7 months of rent as deposit, this is still significantly higher than the rest of the country. From an owners perspective, a tenant who’s willing to pay a bulky security deposit is preferred as they can deduct any damages to the property against the security deposit they’ve paid.

For rental deals, the above 4 factors are crucial. While negotiating the deal, ask your self which amongst the above 4 factors are in your favor? A bad customer profile can definitely be offset by a higher security deposit. You can negotiate rent by agreeing to move into the house a few weeks early. It’s always a trade between these factors.