The direct answer
A lease-renewal concession can be compared with expected vacancy and turnover cost by calculating the total economic cost of each scenario over the same period. The cheaper option is not determined by the concession amount alone because downtime, make-ready, leasing expense and the achievable new rent also matter.
Price the renewal scenario
Calculate the concession, any below-market rent difference and other renewal costs for the chosen comparison period. A free month, fixed credit and reduced monthly rent have different timing but can be converted to total dollars.
To apply the approach to an editable scenario, use the Prorated Rent Calculator. For the neighboring question, explore Rent Increase Calculator.
Price the turnover scenario
Estimate vacancy days, make-ready work, leasing or advertising costs, concessions to the replacement tenant and the expected new rent. Use a probability range if downtime or rent is uncertain.
Compare on the same horizon
A renewal may preserve occupancy but lock in a lower rent; turnover may create a temporary loss but reset rent. Compare total cash flow over a consistent lease period rather than comparing one immediate cost with one annual benefit.
Worked example
A $1,000 renewal credit costs $1,000 directly. If replacing the tenant is expected to cause $1,500 vacancy loss, $900 make-ready and $500 leasing expense, turnover starts at $2,900 before considering any difference in future rent. The final decision still depends on the new lease economics and uncertainty.
Common mistakes and limitations
Do not assume retaining every tenant is cheaper. A large rent gap, poor payment history or unusual repair risk can change the decision.
Lease terms and state/local law may specify a different proration convention; calculator does not determine legal entitlement.
Frequently asked questions
Is one free month always more expensive than a small rent discount?
No. Convert each concession to total dollars over the same lease period.
Should expected vacancy be a single number?
Not necessarily. A range or sensitivity analysis is useful when leasing time is uncertain.
Sources and further reading
The article’s examples are illustrative arithmetic. The references below provide context for operating, valuation or transaction concepts; they do not endorse the assumptions or the calculator.
- GovInfo / HUD — 24 CFR §880.608 — Security deposits (federal housing program example)Program-specific example referencing state/local deposit requirements; not a national interest-rate rule.
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