Should I pay tenant finders fee?

Question

Is it a good idea to offer a $500 finders fee to anyone who refers tenants that sign a lease for my SFR? I would like to offer this to anyone, friends and real estate agents. Pros/cons or issues? (monthly rent ~2600). If you don't like this idea, please offer me your alternative ideas or best practices. Thank you!

Sharlene Mulchandani · Answer

@John B. The idea of a finders fee is great, since you will get a lot for prospects/applicants for your property. In my opinion giving away $500 is quite a bit, even though your property is a nicer home with premium rent. I'd suggest starting off with about $300 and see how that works.

John B. · Answer

Follow-up:

I had a lot of interest and four qualified tenants to choose from. I was able to sign a lease for the full asking price in ten days on market. Only one agent contacted me to show her clients and she stated up front that she "understands I don't pay agents," which I never said either way (they ended up canceling the showing however because my place was too small). And I never got around to advertising my willingness to pay a possible finders fee. This hot market made it easy on me this time around. We'll see what happens next year if I have to advertise again.

Also, because this was a nicer rental home with premium rent prices, I had a drone video made of the surrounding village area and how my home fits in. It came out really nice and I think it certainly helped my marketing. The cost was only $220, so very reasonable.

John B. · Answer

@Matt Ziegler I actually just listed the property so let's assume pricing is accurate for the market. Mainly just wanted to be able to post listing on social media and offer an incentive to share or promote. Also, would like to tell real estate agents that I could offer a flat $500 versus whatever % they make want. Your thoughts? Thank you so much

Pat L. · Answer

We get referrals all the time because they like the places we have, so never considered a finders fee per se. I bet 40% of our new tenants have been this type of referral, the rest from just networking.

Our best was when a tenant vacated because we had to significantly increase the rent when our tax assessment more than doubled killing our cash flow. So she referred us to a kid looking to buy. He was a disabled veteran & he offered us $50k on a SFR that we paid $27k for after rehab. We subsequently held the note with $12k down. He then qualified for the veteran property tax exemption & now is ONLY paying a $4.19 library tax. So the assessor got Catch-22'd on that one & we don't need to hold an escrow account.

Matt Ziegler · Answer

First question that comes to mind is, are you having difficulties finding qualified tenants?

Is your property priced right, with the correct amenities for your market?

Finders fees are fine, but why isn't this unit generating interest on it's own merit?

I agree that screening is the key no matter how you find your prospects.

Best of luck....

Bjorn Ahlblad · Answer

@John B. 500 bucks is not a lot for a decent tenant. Screen them just as thoroughly as you would one you found yourself.

Should I pay tenant finders fee?

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