21. How to Negotiate your Rent and Save $3,600 per year

Blog number 17 in the series on wealth accumulation. Context: Male, 29 years old

Most people understand negotiation to be a battle of wills or a series of skillfully orchestrated oral arguments that only a few uniquely talented individuals can pull off. This can be negotiation, but I would argue that in reality negotiation can be done completely virtually, amicably, and largely without drama. The following post details the steps of effectively and easily negotiating down your rent.

General Thoughts on Negotiation:

1. Effective negotiation is largely about leverage and leverage in its simplest terms are arguments that you can point to that increase your chances of getting your desired outcome. This leverage can be divided into two types: Real and Fake. 

Real Leverage: Real conditions, evidence, or facts that you can point to that support your position and increase your chances of reaching your desired outcome. 

Perceived Leverage: Invented or overblown conditions, evidence, or facts that you can point to that increase your chances of a desired outcome.

You should always prefer to use real leverage to reach a desired outcome, but recognize that in some cases fake leverage can be useful to push a situation over the edge and into your favor. Always be wary that a lie can be exposed and undermine your argument or the relationship at large so be incredibly tactful and selective with which type of fake leverage you are using.

2. Negotiation is a conversation and not a command - The movies make us believe that great negotiators are able to command their adversaries to cave to conditions that are in the negotiators interest but in reality convincing takes time and a careful and reassuring hand. Pushing too hard can often lead others to dig in resulting in the negotiation stalling or failing entirely. Make sure that you go into every negotiation with the intention to listen and the belief that progress should and can be made over multiple conversations.

3. Timing & Efficiency Matter - Effective negotiators are able to clearly establish what they want and how they want to get there even if they don't fully convey the idea to the person or people they are negotiating with. This conception of a path forward enables good negotiators to ensure that conversations are continuing to make forward progress on a timely basis (nobody wants to be stuck in a continuous stalemate). In addition to making progress, timing is important. Timing in this sense means there needs to be some level of urgency tied to the suggestion, there needs to be mutual benefit in 

How to Negotiate Your Rent:

1. Timing: Wait until a month before your lease is up, or in the case that you have month to month available to you wait until 12 months have passed since the start of your lease. In addition, make sure you are cognizant of vacancy rates in your building as higher vacancy in the building will increase the chances that your negotiation tactics will play out in your favor.

2. Market Research: View similar apartments in your area to establish a baseline for price in your community. Consider and collect links and prices for apartments or houses that have the same number of bedroom/bathrooms and units with one more or less bedrooms. Understanding your direct comparisons and the units above and below you in price will enable you to have a complete picture of the market in your area. (use zillow or apartments.com or some other aggregator to conduct this research). The goal here is to find like units that are priced at lower rates or better units priced at lower rates so you can establish that the unit isn't properly priced.

3. Cost of Vacancy: One of the additional important data points to consider in this negotiation is the cost to the property manager/owner of your unit being vacant while they search for a new tenant. In most cases you can assume that a unit will sit vacant for a month or two (in rare cases) after you vacate your apartment. This is forgone revenue for the property owner and is a useful negotiation data point. In simple terms, this is 1x or 2x your monthly rent. Once you establish this amount divide by 12 and subtract from your current rent to give yourself a reasonable additional price point to anchor on in your negotiations. For example, if your rent is $2,000 a month then (2,000/12)= $166 and $2000 - $166 = $1,834. So a new proposal around $1800 or $1900 monthly would be a reasonable ask. Ideally, this figure is the lower bound in your price negotiations.

4. Establish Reasonable Price (Boundary) for Your Unit: By using your cost of vacancy as your first data point ($1800) use your market comps to determine if this figure can be lowered. Ideally there is a unit that you can point to that can justify lowering your number below this initial price. If you are unable to find units that can justify a lower price the chances that you will be successful in this negotiation will drop considerably. As you determine what new price you want to suggest to your property manager it is usually negotiating best practice to start in this case lower than where you want to end up, just make sure it is within reason.

5. Establish a narrative - Once you have the new price that you want to take to your property manager it is important that you construct a narrative around this figure. This can be your chance to create urgency or establish legitimacy of your leverage. Below is an example that I sent to my landlord while negotiating my rent. 

Subject: Revisiting Rental Terms

Email:

5. Send it - There is no harm in asking if it is done respectfully. So don't worry about creating conflict or the reaction of your property manager. If it is overtly negative maybe it is time to find a new place anyway. 

A few last notes: 

1. Don't make statements you are unwilling to back up - Claiming you are going to leave the apartment building or putting in your 30day notice as tactics to put pressure on your property manager can backfire if they call your bluff. Backpedaling on your statement can damage trust or create a misunderstanding that puts you in a bad position (ie. the property manager finds a new tenant given your claim). 

2. Don't negotiate over less than $100 - In the vast majority of cases sums lower than this amount are difficult to negotiate with landlords as you want a lengthy discussion on this topic should be meaningful. If your situation is such that this sum of money is meaningful to negotiate over make this clear to your property manager.

3. Your communications as always should be concise, respectful, clear, and well timed. - As mentioned, you should be able to conduct this conversation without harming your relationship with your landlord and without wasting everyone's time. 

In conclusion, with this template and the right conditions you should be able to save a few hundred dollars a month on your housing expenses with a little bit of research and a short email. Read on for more information on how to save on your phone bill.