As a commercial real estate property owner who manages multifamily properties, the biggest challenge with the property isn’t so much the maintenance and upkeep as it is keeping the building occupied. Even when you’re able to keep your properties full, there is still the challenge of finding ideal tenants.
These problems are actually relatively easy to overcome, and yet many landlords fail to utilize their best tool: their current tenants. One of the easiest ways to solve both of these problems simultaneously is to lean on referrals from the tenants you already have.
Why Your Referral Bonus Program Doesn’t Work
So you’ve identified a solution to your problems, but now the real question becomes, is your referral program working for you? I would bet that it isn’t, and here’s why…
You’re not focused on your referral program. And you’re not alone — most apartment owners don’t focus on their referral programs. Generally apartment owners will offer a small reward for the name of a good tenant. Once or twice a year these programs may get some advertising run time on a basic flyer in the elevator or in the tenant’s mailbox. Does this sound familiar?
If so, there is one question that you need to ask: would $50 to $100 entice you to go out of your way to bring your landlord a new tenant? I didn’t think so.
Why Referrals Are the Best Way to Find New Tenants for Your Commercial Property
Let’s face it…screening tenants is not an easy task. There are some easy ways to eliminate the really bad tenants, but the majority of the time you have no idea what your tenant will really be like. You can check references and run interviews, but even with all of that background information you won’t know what a tenant is like until they move in.
When you rely on your best tenants to provide you with a referral the odds are that you are getting a like-minded individual who is probably going to be a good fit for your building. These referrals are essentially a pre-screening process for you. Your tenant, who you already trust, is able to directly vouch for the person who they are referring to you.
The other great part about relying on referrals is that your current tenant will help your new good tenant to stay. When your tenants are inviting their friends, they are creating their own community in your building, and when they create a good community everyone wins. Your clients will stay and you will have a full building with minimal problems and lowered operating expenses.
How to Make Your Commercial Real Estate Referral Program Work
So what can you do to help turn around your current referral program? Stop being so cheap!
Think about what you’re currently putting into locating new tenants. Paid referral services and advertisements can add up quickly and fail to deliver a strong return on your investment. Worse than that, what does a vacancy cost you? Receiving rent checks is much better than paying to maintain a half-full building.
When developing a referral program for your commercial property, put yourself in the shoes of your good tenants. What would really entice you to encourage your friends to move in? Consider offering anywhere from one-half month to one full month as a referral bonus, paid out of the new tenant’s second or third month’s rent payment. Your tenants will be happy and cost-wise this method will be just about equal to what you’re currently paying to acquire residents.
Having a strong value in your referral program is one thing, but it’s all about how you sell it. You need to make your referral program attractive. Rather than going with a cookie-cutter “two weeks rent,” try to offer something tangible. Consider going with a fun promotion. Tell your clients “We’ll buy your holiday presents for you!” or “Back-to-school shopping is on us!” If you keep it timely and adjust your offer for each season, you’ll have an attractive referral program year round.
Do you have a creative idea for a referral bonus program that has been helping you to attract tenants? Tell us about it in the comments!