A free month costs a month, and three free months do not cost three
With one month free at a 135 dollar rate, the face value and the expected cost are the same 135 dollars, and they should be: a tenant who moves in occupies month one whatever happens next, so that discount is spent with certainty. Extend the offer to three months free and the two separate. The face value is 405 dollars, but at an 8 percent monthly move-out rate the expected cost is 373.46, because some of the tenants are gone before the third free month arrives.
That gap is not good news. The same people who make the offer cheaper are the ones who never reach the months that were supposed to pay it back. On the three month version the payback moves out to month 7, by which point only 55.8 percent of the tenants are still there.
Payback in month three, and a fifth are already gone
At the default figures there is 151 dollars to recover — 135 of free rent plus 45 to put the tenant in, less the 29 dollar admin fee collected at the counter. Month one brings in nothing and costs 6 dollars, months two and three bring in 129 each, and the cumulative column crosses zero in month three at 101 dollars ahead. The survival column beside it says the odds of the tenant still being there in month three are 77.9 percent. So roughly one move-in in five takes the free month and leaves before the offer has been earned back.
The move-out rate that makes it a wash
Turn the question round: how quickly would tenants have to leave for the offer to be worth nothing at all? For one month free the answer has a closed form — the monthly net rent divided by what has to be recovered, or 129 over 151, which is 85.43 percent a month, an average stay of 1.2 months. The page finds it by bisection on a bracket it checks for a sign change first, and it lands on the same figure to well inside a hundredth of a percentage point. For three months free it falls to 52.56 percent, an average stay of 1.9 months. Both are far outside anything a real facility sees, which is the honest way of saying that at these numbers the offer is cheap in the sense that matters.
The half that is not here
What the offer costs and when it is earned back are both answerable. Whether it was worth running is not, because that depends on how many extra move-ins it produced, and nobody knows that without running the same facility both ways at the same time. Anyone who tells you a first month free pays for itself is asserting exactly the half of the arithmetic that is missing from this page and from theirs.
The stay model is also a simplification. A constant monthly chance of leaving makes the average stay exactly one over that rate and gives a clean decay curve. Real storage tenancies leave heavily in the first three months, much less after six and hardly at all after two years, so a constant rate understates how many tenants are still there at month twenty-four. If you have your own survival curve, take the payback month from this page and the survival odds from your own data.
Questions people ask
What does a first month free actually cost in self-storage?
The face value is one month of rent — 135 dollars at the rate in the form — and for a one-month offer the expected cost is the same, because a tenant who moves in always occupies month one. The offer only becomes cheaper than its face value when it runs into months the tenant might not be there for: three months free at an 8 percent monthly move-out rate has a face value of 405 dollars and an expected cost of 373.46.
When does a move-in concession pay for itself?
At the defaults, month three. There is 151 dollars to recover once the admin fee is netted against the free month and the cost of putting the tenant in, and the cumulative column crosses zero in the third month. The number beside it matters as much: the odds of the tenant still being there in month three are 77.9 percent, so about one in five takes the offer and leaves before it has been earned back.
How do I turn a move-out rate into an average length of stay?
They are reciprocals under the constant-rate model this page uses: an 8 percent monthly move-out rate is an average stay of 12.5 months, and a 12.5 month average stay is an 8 percent rate. The selector on the form takes whichever you have. The survival odds — 60.6 percent still there at six months, 36.8 at twelve, 13.5 at twenty-four — follow from the same rate.
Is a longer concession better than a deeper one?
This page will cost both and will not tell you which to run, because the answer depends on how many extra move-ins each produces and that is not on the form. What it will show is that the two behave differently: a deeper discount over one month is spent with certainty, while a longer offer at the same face value costs less in expectation and pushes the payback month further out.
What is the break-even move-out rate for an offer?
The rate at which the expected value of a tenancy falls to nothing. For one month free at the figures in the form it is 85.43 percent a month, which is an average stay of 1.2 months; for three months free it is 52.56 percent. The page finds it numerically and reports the residual, and for the one-month case it agrees with the closed form to within a hundredth of a percentage point.