As a landlord, life is usually good when your units are rented and your customer’s are paying.
Now, granted, you may be dealing with other issues, but at least your assets are bringing you in money every month.
Life is not so good when you have a vacant unit, or worse, when you have a occupied unit that is not being paid for.
Some landlords use a “Cash for Keys” program, where they pay their non-paying tenants to leave. I personally would never pay a tenant who had potentially lied and not paid rent, but this post is not about that.
In this post, I would like to introduce you to my program, “Cash for Tenants”, which is a program where I LOVE to pay my tenants!
Cash for Tenants
This is one of my favorite methods for getting a new tenant. Whereas some landlords prefer to reward tenants who do not pay them by giving them “Cash for Keys”, I prefer to reward my good and paying tenants by offering them “Cash For Tenants”.
When we know we have a property that will be coming vacant in the future, the first thing that we do is to notify our existing tenants that the property is available and we will give them a $50 gift card if they refer a tenant to us who we end up renting to.
At first I had difficulty selling this idea to my partner. Why should we pay extra to find a tenant? It turns out that there are several reasons and after explaining them, this program is now part of our marketing strategy.
1. It Costs Money to Advertise
One of my marketing professors once told me that when sales are down, advertise more because you are not bringing enough people in. I always think of this when looking at vacancies. Without advertising, no one will know about or be interested in your property. So it makes sense to spend money and get the word out as quick as possible to as many people as possible.
Depending on your market, free options like signs in the yard and Craigslist might work. In other markets, you may have to purchase a newspaper or online ad. Even in the rural area that we live in, it costs is ~$15 to advertise in the small local paper. A few weeks of this advertising method will equate to that $50 referral bonus.
2. Vacancies Add Up Quickly
This is a hidden one that people often miss. Let’s take one of my units that rents for $650. Now let’s take an average of a 30 day month. $650/30 days = $21.67. This means that each day your property is sitting vacant, it is costing you $21.67.
Where as it took 3-4 weeks of my newspaper advertising to equal the cost of our tenant bonus, it only takes 3 days of vacancies to exceed that $50 bonus. If paying a tenant $50 gets a property rented a few days faster, the it was worth it.
3. Good Tenants Will Often Refer Other Good Tenants
When getting a random assortments of applications from our website, yard signs, newspaper and Craigslist advertising, we never know the quality of the applicants that we are getting until we go through screening them.
What we have found (and I believe that it will hold true for most people) is that existing tenants that are good will often refer other good tenants. Obviously you still should screen these tenants, but we have found that more often than not we end up liking the referred applicant and end up renting to them.
This is even more true if the unit is in their building. No one wants to live next to someone that they won’t get along with. So if our existing tenant is quiet, they will probably refer someone that is quiet. If they are a little louder and have occasional parties, they will most likely refer someone who is ok with that.
Not only does this dramatically cut down on the complaint calls that we get, it also reduces turnover from tenants since they often have friends living close by.
Do you offer tenants money? What has your experience been with having tenants refer other tenants?
Photo Credit: DarthNick