When signing a contract for a rental property, initial costs such as a security deposit, key money, and brokerage fees are required. So many people may be surprised by the high initial costs. Furthermore, since moving requires money, many people would like to keep these costs as low as possible.
Thus, this article will guide you in negotiating a reduction in initial costs, give tips for success, and provide negotiation tactics to reduce renewal fees and rent.
Village House can show you reasonable properties that do not require key money, security deposits, or renewal fees. If you are looking to reduce your initial costs, please take a look at our website.
6 Tips when negotiating initial costs
If you are in negotiations for your up-front costs and you go in blind, saying, “I want the initial costs to be lower!” then you’re likely to end up with a bad result. Here are six tips to remember when negotiating a rental property’s initial fees.
- Initial cost negotiations take place between May and August
Many people look for a place to live alone when they enter university or start a new job in April. For this reason, the real estate market is most active from January to March, and competition among prospective tenants is at its peak.
Consequently, real estate agents will not take you seriously if you negotiate during the high season from January to March. Also, since many people want to move into popular properties, it can be challenging to negotiate a reduction in the initial cost.
On the other hand, the market calms down after the holidays in May and during the summer, and fewer people are looking for a room. May to August is the low season for real estate agents, so you can take your time negotiating with an agent.
Moreover, real estate companies and landlords wanting to fill vacant rooms also come into play, making it more likely that you can move in with more flexible terms than during the high season.
- The best time to negotiate is before the signing
Negotiating the initial costs of a rental property is best done just before signing a contract.
Once you have agreed to the terms, you may incur additional fees if you make any changes to the contract. Therefore, if you do negotiations before finalizing a contract, you, the tenant, will have the advantage, thus making the whole process easier and go more smoothly.
When negotiating the initial cost, some real estate companies say, “It is difficult to change the cost, so please contract with another real estate company.” If you intend to do initial cost negotiations, using a small real estate company or a service that handles initial cost negotiation is effective.
- Get quotes from multiple real estate companies
Usually, multiple real estate companies handle the same property.
First, request an estimate by email from a real estate agent handling the property you are interested in. Then, request a quote from a different real estate company that handles the same property.
You can negotiate the up-front costs based on these quotes. We recommend negotiating specific expenses, for example, “The brokerage fee for ABC Real Estate Company is one month’s rent, so could you give me a little more discount?”
- Carefully discuss fees via email
Use email to negotiate your initial costs of a rental property.
The advantage of negotiating via email is that your communications with the real estate company will remain in written form, which can help you avoid future problems. However, if you only do verbal negotiations, there is a possibility that you will have trouble with agents saying they said or didn’t say something.
Additionally, even if it is difficult to convey information through direct negotiations, you can easily communicate it through email. Even if you want to keep the initial cost as low as possible, saying, “Please lower the price” directly takes courage. But, if you use email, you can negotiate without that added stress.
- Get introduced to properties with low initial costs
Some people may feel that negotiating initial expenses is a huge obstacle. If you are not good at negotiating, one way to deal with that is to request to be shown properties with a low initial cost.
By talking to a real estate company representative about your situation, they will give priority to introducing you to properties that do not require deposits or key money or “free rent,” where rent is free for a certain period.
- Consider the other party’s benefits when negotiating
The other party’s position is also important when negotiating initial costs. The approach of “just make it cheaper” may give the other party a negative impression that you are in trouble with money, so you are likely to fall behind on payments.
In the first place, real estate companies do not want other companies to take over their contracts, and landlords and management companies are in the position of not wanting to leave properties vacant.
Present specific benefits to the landlord, such as, “If it’s ○ yen, I’ll pay the cost all at once” or “If you can reduce the cost of 〇〇, I’ll sign a contract right away.”
Building trust with the real estate agent you are working with is also essential. To make a good impression on them, you should maintain a position of requesting.
Instead of being too high-handed, try to negotiate in a way that benefits both parties and avoids any unpleasant feelings.
Negotiation of security deposit and key money
Some up-front costs you can negotiate to reduce the price are your deposit and key money. If the landlord wants to avoid having a vacant room, you might be able to reduce the security deposit and key money depending on negotiations.
For example, suppose you compare similar properties in the same area and find that their security deposit is higher than others. There are successful cases where you may be able to make specific negotiations, such as, “I’d appreciate it if you could reduce the security deposit from two months to one month.”
However, remember that the security deposit is a compensation charge in case of trouble. Sometimes, the key money is also included in the cost of repairing the room. So, waiving the security deposit and key money can be pretty difficult.
Brokerage fee negotiation
Brokerage fees are fees paid to real estate companies when a property contract is finalized. Generally, the brokerage fee is set equal to one month’s rent, but some real estate companies may offer a discount.
Since real estate companies may receive listing fees and advertising fees from landlords when showing properties, there are instances where they can secure profits even if they discount brokerage fees. So, even if the brokerage fee is already set as one month’s rent, try negotiating to get a discount.
Negotiate renewal fees
A rental renewal fee is a fee you pay to your landlord when renewing your contract. As a general rule, there is no problem negotiating a renewal fee reduction.
The average renewal fee is one month’s rent. However, realistically, getting just the renewal fee reduced seems difficult. When negotiating, it is a good idea to negotiate the renewal fee as well as the rent.
We will go over the renewal fee and rent negotiation in the next section.
For other information on rental renewal fees, please check out Which is Better: Renewing a Lease or Moving?
Rent reduction negotiation
If the renewal fee is written in the contract, it will be difficult for the landlord to negotiate. By comparison, it is easier for landlords to negotiate with you about rent reductions.
For example, we recommend negotiating to show your options, such as, “If you can reduce the renewal fee to 〇〇 yen or reduce the rent to △△ yen, I would like to renew.”
However, you should avoid excessive price negotiation. It is best to negotiate a rent reduction of less than 5%. The same goes for other clauses, but it’s up to the landlord to negotiate a lower price. Try doing it with the mindset, “I’ll be happy if the initial costs are lower!”
If you find negotiating initial costs, contract renewal fees, and rent reductions annoying, contact Village House! We do not require deposits, key money, brokerage, or renewal fees. We have over 1,000 properties nationwide with rent starting from the 20,000 yen range, and “free rent” is valid for one month, making it a great deal.
*Depending on the contract details and screening results, a security deposit and a joint guarantor may be required.
**Benefits may vary depending on the property.
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- Can I Cancel My Rental Apartment Application? Cancellation Reasons and Things You Should Know
Hello, I’m Machiko Doi, a freelance writer who writes about housing and living in Japan.
I live in an 80-year-old house that I inherited from my grandparents along with my two shelter cats and daughter.
We live a relaxed life while repairing the house.
I like to cook vegetables from the garden and fresh fish caught by my father, and enjoy them with cold beer on a hot day or hot sake on a cold day.