Welcome to the Five Minute Prime Podcast. Quick actionable tips to master personal finance and real estate investing. Just five minutes a day will help you build wealth and achieve financial freedom. Hey Prime Investors, Martin Maxwell here. Welcome back to the Five Minute Prime Podcast. Picture this. You've got the tenant every landlord prays for, two years in your rental, paid you 24 times out of 24. Never a noise complaint, never a late text, treats the place like they own it. And the renewal email lands, they want to stay. Great. Then you read the second line. So they want $300 a month off. $300 on a $2,000 rental. That's a 15% cut. And your first reaction is the right one for most landlords and the wrong one for you. That's absurd. The market is not down 15%. And you're right, it's down about two. So why is your best tenant asking for seven times what the market actually moved? Stick with me. Because the answer is going to change how you read every renewal from here on out. And it starts with a number that is not printed on your lease. Let me put you in the chair. Your rent today, two thousand a month, your tenant. Flawless, your market. Call it a Sunbelt Metro. Austin, Tampa, Phoenix, asking rents down roughly 2% year over year. Soft and getting softer. So when the $300 ask comes in, you're ready to say no. You'd happily renew them at $2,000. But they attached a screenshot, a nearly identical house, three streets over, advertising. And here's the part that matters. Two months free on a 12-month lease. Now stop. Run that comp's real number with me. $2,000 a month, but two months are free. So you're paying for 10 months and getting $12. 10 times $2,000 divided by 12, that's about $16.67 a month. Effective. That one line item changes everything. Face rents in your metro slip 2%. But effective rents after the free months that about 40% of the listings around you are dangling right now are down a lot more than two. Your tenant isn't lowballing you. They're not even being aggressive. They're comparing your face rent, $2,000, to the market's real concession adjusted rent, about $1,700. And from where they're sitting, you're the expensive one. The absurd ask just got uncomfortably reasonable. So three doors. And before I tell you what I do, I want you to actually decide. Hit pause, pick one, then come back. Door one, give them the 300, renew at 1700, match the market, keep a perfect tenant, zero turnover. Door two, hold the line at 2000. Bet they're bluffing or bet they won't actually move. Door three, counter, but to your number, not theirs. And maybe don't cut the rent at all. Pause. Pick one. Got your answer? Good. Here's mine. And I'm going to make the case against the door most landlords pick first. That's door two. Hold the line. It feels like discipline. It's usually the most expensive thing you can do. Here's the arithmetic. A turnover, one vacant month and change, make ready cleaning, ads runs you about $3350 on a unit like this. And here's the kicker. In this market, when you release, you release at roughly the effective number your tenant is already asking for. So holding the line usually means you spend $3,300 to end up at the tenant's number anyway. Having evicted voluntarily a tenant who paid you 24 times in a row. That's not holding the line. That's a donation. And the 3300 isn't even the worst part. Think about what you're trading for. You're swapping a tenant with a 24-month track record, a known quantity, a sure thing. For a stranger off a screening report. And in a soft market, the applicant pool is thinner and shakier than it was two years ago. Maybe you get someone great. Maybe you get someone who's fine until March. A perfect paying tenant is the single most valuable asset in your whole operation. And door two throws it in the trash to win an argument about a hundred bucks a month. Now, door two isn't always wrong, and I won't pretend it is. It's right in exactly two cases. One, the tenant is bluffing. That comparable is fictional, or worse than it looks, and they have nowhere to go. Two, your rent is so far under market that even after the cut you're still at the going rate. Both can be true, but you have to verify it. Don't assume your tenant is bluffing because you want them to be. Okay, door one, give the full 300. Here's the trap, and it's subtle. The enemy is not the discount. The enemy is discounting past what their alternative actually required. That 1667 comp is the raw number, but moving is a pain. New deposit, the hassle, the risk of a worse place. So your tenant would resign at a premium to that comp just to stay put. If that premium puts them at, say, eighteen hundred and you hand them 17. You just left a hundred bucks a month on the table for a tenant who wasn't going anywhere. Over a year, that's twelve hundred dollars you gave away for nothing. Which is why nine times out of ten, the operator's move is Dr. Three. And it's got two forms most landlords forget. Form one, counter to your real relet number. Call it eighteen hundred. And uh say it plainly. The market moved, here's where it actually landed, and I'd rather keep you than chase a higher number and lose you. Tenants respect that. It's honest and it's occupancy insurance. Form two. And this is the one I'd reach for first. Don't cut the rent at all. Trade it for value. A twelve hundred dollar appliance package, a fresh paint and fixtures refresh. That costs you about six months of a $200 discount. But here's the difference. It doesn't recur. It doesn't reset your rent floor for next year, and your tenant feels it every single day. You just turned a price cut into forced appreciation. You made the asset better instead of just making it cheaper. And here's the wrinkle most landlords miss. That $200 a month discount, it's just gone. It's income you'll never see again, and you can't write off money you simply didn't collect. But the $1,200 appliance package is a depreciable improvement. It's an asset on your books that comes back to you over time. Talk to your CPA on the specifics, but structurally, the so-called expensive option is often the cheaper one after tax. Pair it with a two-year lock, and you've bought yourself occupancy certainty straight through the soft patch. One honest caveat before I let you go. This is a soft, no rent control market. If you're in a rent stabilized city, the whole calculation changes, your increase may be capped, and the discount mechanics are different. Know which one you're standing in. So here's your challenge this week. Before your next renewal goes out, and the season's on us, most leases turn over between May and August. Do this one thing. Calculate your effective relay rent, not the face number on a listing, the number after the free month. Pull two real comparables, strip out the concessions, and find out what your unit would actually command empty today. Because once you have that number, the renewal writes itself. If your effective relay is 1800, you don't argue with a 1700 ask. You counter at 18, or you hand them an upgrade and hold two grand on paper. And then the then what? You build that effective rent check into every renewal from now on. So you're never again reading this year's market off, last year's lease. Keep the great tenant, just keep them at the right number. And the right number is the one the market is actually charging. The full write up, the deal, the three doors, side by side, and the exact math is linked right there in the show notes. Go run your number. I'm Martin Maxwell. This has been the Five Minute Prime podcast. I'll see you next episode.