In one sentence
Rent discounts or incentives offered to attract or retain tenants, such as free months, reducing effective rent.
The longer version
Concessions, free rent, reduced deposits, or move-in incentives, lower the effective rent a property actually collects. They are common in lease-up and soft markets and mask the true net rent.
Lenders underwrite effective rent net of concessions, because a rent roll's stated rents can overstate real income when concessions are heavy.
Common questions
- What are rent concessions?
- Discounts or incentives offered to attract or retain tenants, such as free months of rent, reduced rent or paid moving costs.
- How do concessions affect underwriting?
- They lower effective rent below the face rent. Lenders underwrite net effective rents and check whether concessions are burning off or becoming permanent.
- Where do concessions show up in diligence?
- In the rent roll, leases, operating statements and tenant estoppels. Inconsistencies among them are a common underwriting issue.
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