I had an idea, but not sure it is a good one....

15 Replies

Listening to various podcasts, one of which is BP Podcast 356 with Joe Asamoah, that talked about landlord and tenant relationships got me thinking. Joe gives out gifts and flowers and such to his tenants. I really like that mentality of providing a service for our tenants. I think this is simply amazing.

Now, I am wondering if say you were doing well in your cash flow from every door you owned. Hypothetically +250$ per door, and you took 1/12th of the tenant's monthly rent, each month, and put it somewhere in your LLC. (in other words your bottom line allowed you to work a little bit harder to get some more doors and still live off your passive income) Then at the end of the year (I would choose December 1st, or maybe November 30th) you gifted them the amount back for the previous 12 months, do you think that would:

A. Build Extreme tenant loyalty (technically a month of free rent)?

B. Maybe anger them if you didn't tell them you would do it and the way the system worked. (Which would be since the day of lease signing, each month you set that 1/12th aside to pay out that November or December with a note stating: Thank You for being a superb tenant! (or something more personal)?

C. NOT ASKING FOR LEGAL ADVICE.... possibly be illegal in some states or areas?  I think gifts are not illegal anywhere. Obviously I would have to go over this with legal counsel before I ever even thought about doing it. 

Anyway, I ask because I had a conversation with a co-worker that I would always try to work with someone that hit on tough times if I could, and a crazy idea like this might really put a smile on my tenants faces and better yet, provide even more loyalty to produce less tenant turnover. 

Now overall this would obviously mean I was charging less than current rental rates because even if I was at the current rate for my property, I would be giving them back 1/12th their rent per month at the end of the year, but if they stayed loyal and took care of my property and also with this gift every year would likely feel less upset over annual rent increases.

Thoughts?



@Allen Gross It's commendable that you want to perform such a service for your tenants! I'm not sure I would personally give a "free month of rent" each year but would perhaps look at other options to show appreciation for the tenants. Hosting a yearly summer BBQ and holiday party could be a great way to accomplish this without getting into the weeds of legal factors of gifting rent at the end of the year. Just being personable, fair (but stern at the same time), and displaying empathy goes a long way and would set you apart as a good landlord.

By 1/12th of their rent, I am assuming you mean of the cash flow-not literally 1 month's rent?

Some tenants might be happy, others would start taking advantage of your generosity.  If I have a good tenant who has done something extra or is having a tough time, I may knock $50 off their rent; but this is not a regular thing.  Otherwise, I sometimes send them a card at Christmas-just a card.

If you want to give them a small gift (gift card to a grocery store or some flowers), go for it.  I agree with Tim (not that I would throw a BBQ for my tenants) being fair but firm and showing some empathy when needed (something happens with a paycheque and they need a few extra days to come up with rent) goes a long ways.

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@Allen Gross I love seeing landlords out there who look to actually take care of their properties and tenants!

Unfortunately, what you're looking to do might cause more headache than not... This could get pretty grey in some areas and all it takes is one bad apple out of all your properties to make you wish you had never done this. 

For the tenants that you respect and appreciate, I'd keep it simple with a handwritten card and possibly a coupon/gift card (Free holiday pie, a free turkey, $20 gift-card to the local supermarket, etc). Most people like to enjoy some sort of holiday meal and/or HAVE TO buy food and this would pair well with the timeframe you're wanting to give something back. 

Most landlords out there never speak to their tenants, so something as simple as this will show good character to your tenants. And feel free to save money and ignore the tenants that have given you headaches! Best of luck. 

You can build great tenant loyalty by being fair, honest and responding to reasonable requests in a reasonable way. There's no need to discount your services- when your mechanic fixes your car, do you think they did a terrible job if they didn't give you a discount? Nope- you are happy if they charge what they said they would, answer your questions in a timely and understanable way. 

If you are worried about vacancy, you are probably investing in the wrong area. Great tenants are easy to find if you are providing a quality product in an area that people want to be. 

Best of luck!

Originally posted by @Corby Goade :

You can build great tenant loyalty by being fair, honest and responding to reasonable requests in a reasonable way. There's no need to discount your services- when your mechanic fixes your car, do you think they did a terrible job if they didn't give you a discount? Nope- you are happy if they charge what they said they would, answer your questions in a timely and understanable way. 

If you are worried about vacancy, you are probably investing in the wrong area. Great tenants are easy to find if you are providing a quality product in an area that people want to be. 

Best of luck!

Thank you for your insights, the reason I was considering something I had never heard of was because I heard on another podcast a group was also working help tenants save money (like actual savings accounts) to help the tenants build stronger futures.

I love the idea of helping people and of course providing a safe environment to live in is doing that.  Me being generous doesn't change the person on the receiving end, most likely,  or their habits, but that is why I put my idea out there so I can receive valuable input.

Thank you.

Originally posted by @Troy DeLong :

@Allen Gross I love seeing landlords out there who look to actually take care of their properties and tenants!

Unfortunately, what you're looking to do might cause more headache than not... This could get pretty grey in some areas and all it takes is one bad apple out of all your properties to make you wish you had never done this. 

For the tenants that you respect and appreciate, I'd keep it simple with a handwritten card and possibly a coupon/gift card (Free holiday pie, a free turkey, $20 gift-card to the local supermarket, etc). Most people like to enjoy some sort of holiday meal and/or HAVE TO buy food and this would pair well with the timeframe you're wanting to give something back. 

Most landlords out there never speak to their tenants, so something as simple as this will show good character to your tenants. And feel free to save money and ignore the tenants that have given you headaches! Best of luck. 

The headache is what makes me worry this is a horrible idea! Thank you for your insight. It is great to have a resource like BP to allow me.to connect with people who are experienced in REI.

Thank you.

Originally posted by @Theresa Harris :

By 1/12th of their rent, I am assuming you mean of the cash flow-not literally 1 month's rent?

Some tenants might be happy, others would start taking advantage of your generosity.  If I have a good tenant who has done something extra or is having a tough time, I may knock $50 off their rent; but this is not a regular thing.  Otherwise, I sometimes send them a card at Christmas-just a card.

If you want to give them a small gift (gift card to a grocery store or some flowers), go for it.  I agree with Tim (not that I would throw a BBQ for my tenants) being fair but firm and showing some empathy when needed (something happens with a paycheque and they need a few extra days to come up with rent) goes a long ways.

 I did actually mean 1/12 the monthly rent, but again this is assuming the cash flow was already high.  The basic, very basic idea, is I would take a hit on my bottom line and not only provide a service but also force myself into more aggressive strategies of acquiring more properties to cover the overall cut of monthly cash flow.

As you say though,  some may take advantage.

You have given me a lot to think about.

Thank you.

Originally posted by @Tim Giberson :

@Allen Gross It's commendable that you want to perform such a service for your tenants! I'm not sure I would personally give a "free month of rent" each year but would perhaps look at other options to show appreciation for the tenants. Hosting a yearly summer BBQ and holiday party could be a great way to accomplish this without getting into the weeds of legal factors of gifting rent at the end of the year. Just being personable, fair (but stern at the same time), and displaying empathy goes a long way and would set you apart as a good landlord.

 Thank you Tim. With the very few times I have ever been a tenant and never once having eceived any sort of thank you and then hearing the podcast, it sounded amazing. Giving back that is. Now, of course, I don't see it as a necessity or owed, but the giving back seemed intriguing.

The legal factors or possible tax consequences are also a fear. I would hate to be generous and find out my gift was taxable for the tenant. That would be exactly opposite of the goal.

Thank you for your input. The bbq and party sound amazing and could obviously have the same effect with extremely less pact.on my bottom line.

Thank you.

@Allen Gross separate any gestures of appreciation from rent, first of all. Lots of reasons for this and folks above have gone into most of them.

If you want to show appreciation along the lines you described, take the money and upgrade the apartment somehow. You don’t have to mark up the rent, and you can likely charge more upon turnover, and you get some benefits.

Paint touch up? New appliance? Nicer Shower heads? Cabinet refacing? Light fixture upgrade? Something simple and achievable in short order

Originally posted by @Allen Gross :

Listening to various podcasts, one of which is BP Podcast 356 with Joe Asamoah, that talked about landlord and tenant relationships got me thinking. Joe gives out gifts and flowers and such to his tenants. I really like that mentality of providing a service for our tenants. I think this is simply amazing.

Now, I am wondering if say you were doing well in your cash flow from every door you owned. Hypothetically +250$ per door, and you took 1/12th of the tenant's monthly rent, each month, and put it somewhere in your LLC. (in other words your bottom line allowed you to work a little bit harder to get some more doors and still live off your passive income) Then at the end of the year (I would choose December 1st, or maybe November 30th) you gifted them the amount back for the previous 12 months, do you think that would:

A. Build Extreme tenant loyalty (technically a month of free rent)?

B. Maybe anger them if you didn't tell them you would do it and the way the system worked. (Which would be since the day of lease signing, each month you set that 1/12th aside to pay out that November or December with a note stating: Thank You for being a superb tenant! (or something more personal)?

C. NOT ASKING FOR LEGAL ADVICE.... possibly be illegal in some states or areas?  I think gifts are not illegal anywhere. Obviously I would have to go over this with legal counsel before I ever even thought about doing it. 

Anyway, I ask because I had a conversation with a co-worker that I would always try to work with someone that hit on tough times if I could, and a crazy idea like this might really put a smile on my tenants faces and better yet, provide even more loyalty to produce less tenant turnover. 

Now overall this would obviously mean I was charging less than current rental rates because even if I was at the current rate for my property, I would be giving them back 1/12th their rent per month at the end of the year, but if they stayed loyal and took care of my property and also with this gift every year would likely feel less upset over annual rent increases.

Thoughts?

I maintain the properties, have any maintenance requests timely and properly performed, didn't raise any rents in 2020 or 2021 due to Covid, but gifts for the tenants?  No thank you.

Originally posted by @Jonathan R McLaughlin :

@Allen Gross separate any gestures of appreciation from rent, first of all. Lots of reasons for this and folks above have gone into most of them.

If you want to show appreciation along the lines you described, take the money and upgrade the apartment somehow. You don’t have to mark up the rent, and you can likely charge more upon turnover, and you get some benefits.

Paint touch up? New appliance? Nicer Shower heads? Cabinet refacing? Light fixture upgrade? Something simple and achievable in short order

 Exactly. You can like your tenants and still realize you are running a business here. And your tenants are not your "customers" in the way that you are a customer of the tire store or Wal-mart. They're more like a cross between a customer and an employee, or a customer and a child (there's a reason it's called a "land-lord"). When you are marketing the property, of course prospects are customers, but once inside you have a much different relationship. You have a number of expectations of them that should be non-negotiable - pay on time all the time, don't damage the property, abide by the rules of the lease, etc - things that you don't get into with a "one and done" transaction that most business entails. 

I treat my tenants accordingly. I expect them to meet the obligations of the lease and I don't accept any BS about why the obligations are not met. On the flip side, one of my tenants had to go deal with the death of her father, who was reasonably young. I added her property to our mow list for the rest of the year without charge. It will cost me a few bucks but it relieved her of trying to figure out how to keep the yard cut while she's 2000 miles away trying to deal with the death of a parent. She appreciates it, and I know that she does, which is why I did it. 

You can treat this like a business and be respectable and not a jerk-off about it without resorting to payola. 

@Allen Gross

If you remember hearing what joe said in the episode he gave flowers and gifts and spent time with his tenants. He didn’t give cash back like a credit card company. I think this is a bad idea for many reasons but I also disagree with giving out any gifts or extras as a landlord. It’s a service landlord offers a nice clean up to date place to live and makes repairs in a timely fashion. Tenant pays on time and keeps apartment clean. They are given the apartment for the money they pay. Rather then giving them a discount why not just offer less then market rent? Or take those profits and invest in more apartments to give more tenants quality housing.

I think that human nature won’t react well to one month of rent being given back to them (especially since you said $250 or more in cash flow so a $1500/month place kills half your cash flow for the year.) One is it’s kinda vain to give cash in my opinion. Think about birthdays and Christmas. Would you give out cash to surprise and excite someone? Or would you plan and think of something thoughtful to give that they may need?

Another thing is this constant battle of far leftist stating that housing is a right snd it should be free. That’s just more reason for them to complain about how much money landlords make that they are able to give back one month. I honestly think it’s coming from a good place in your heart but it would back fire.

The way I am giving back to my tenant is by doing a full remodel prior to them moving in. I offer a nice place which is safe and secure with new kitchen bathroom and flooring. Now I won’t replace for each tenant but if the tenant takes care of the place like they should it won’t need to be remodeled at each turn over just a good cleaning and maybe some paint.

I would rather keep the business relationship strictly business and donate and give back to charities and people in need. It’s like not mixing business and pleasure. Sometime people can’t handle nice acts or gestures snd just want more. What if your roof is shot in year 5 snd you spend $5,000 replacing it? Are you going to give the cash back then? Now your tenant is going to expect it no matter what. They don’t care about the roof they want their cash back for being a good tenant. Now that’s going to cause some problems in the relationship.

It’s like my relationship with my sub-contractors. I pay them as stated in my contract. I don’t advance or do favors because then next time it’s little more money and little further in advance then More and more and before you know it this guy owes you a few grand and walks off to go take advantage of someone else.

I think your idea of giving back is great just not that method!

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@Allen Gross

Just be aware, one act is not tied to another. They are separate.

I give people I do business, whom I know on a first name basis, a free cup of coffee on their birthday. And at Christmas, maybe 2 cups of coffee. If I was standing next to them at Starbucks, I would do the same thing. Sometimes I send people a copy of my favorite book of the year. I have found that people just like to be appreciated. Sometimes it starts a conversation, and sometimes it doesn't. Overall, I have just found that people are more gracious with each other, when each is kind to each other. And doing business with such people makes any business just a little easier. It just is. BNI lead groups have this figured out 100%.

Thank you everyone for so much valuable insight. Everyone has made extremely valid points and showed me I may have a fairly skewed view on how people would take the gift.

One of the many concerns would have been that after the first gift the tenant or tenants might start demanding I lower the rent 1/12 instead of gifting them a free month.

Thisnhas left me a lot to think about but I can definitely see it would not work out like I thought it would work out.

P.s. I would like to have responded to each of you individually but I don't want to inflate the post with 4 it 5 of my own replies at a time.

So thank you @Jonathan R McLaughlin, @Jason G. , @JD Martin, @Justin Sullivan, and @Steve Milford.

It sucks that you might think giving a gift could be illegal and might actually consult a lawyer before doing so.  Talk about a law meant to be broken.  

I like the idea of doing nice things for people and want to foster a good working relationship with my tenants as well.  You ever seen how even some of the nice tenants leave your place when they move out?  Might wish you had some of that cash back.