Tenant referral fees can be a great way to increase occupancy rates without spending a lot of money advertising. There are many advantages to instituting a referral program, including the following:
- You have a large network of ambassadors of sorts talking up the advantages of living at your community. Some apartment communities can have upwards of 300 to 400 tenants, and they’ll all be working for you!
- Good tenants tend to know reliable people. While this is not always entirely true, good tenants that pay their rent on time will likely not refer their unemployed cousin just to get a $100.00 referral fee.
- If you work for a large property management company that currently has several rental communities, the management company can offer a referral fee for any of the properties. So if your tenant refers someone to a community across town that is in your management portfolio, the referral fee would still be paid.
- Your tenants will feel like they are part of the community.
- To make it easier on your staff, when paying referral fees, reduce tenant rent by the amount of the referral fee; typically $100.00. This makes it quicker and easier to process and eliminates the need to process multiple checks for tenants monthly. It also eliminates the possibility of the referral getting lost in the processing.
While the advantages are apparent, there are some things that need to be considered before implementing a referral program, including the following:
- An influx of applicants that are not qualified to rent at your community. While most tenants will only refer quality applicants, others may send everyone they know. And it becomes your job to carefully screen those applicants.
- Make sure your tenants know the rules: the applicant must sign a lease in order for the referral fee to be paid. Coming in to look at an apartment does not qualify as a valid referral. Likewise, the applicant must qualify in order for the referral fee to be paid.
- Someone will need to carefully track the referrals that do come in and make sure that if a lease is signed, the tenant who referred the applicant/new tenant, gets the referral fee that was agreed upon.
Tenant referral fee programs can be beneficial to both property managers and tenants, if handled properly. By instituting a referral program that excites your tenants and benefits the property, you’ll have a win/win situation.