Offering Referral Fee to Tenants in Student Housing

2 Replies

Couldn't find much in the forums about this.

I am in the middle of renovating a future student housing rental (in Pennsylvania) and since I have no good photos of the house (drywall is going up at the end of next week) I have trouble attracting new tenants. Was thinking of offering a referral/finders fee to the students who occupy another house I finished renovating over the summer. 

Since they know other students and know the quality of the house I provided them (they already asked to renew till 2023) they could be very helpful in finding new students for the next house...Was wondering if there is anything I should be aware of while doing so:

Is it legal to offer compensation (payment/gift cards/reduced rent) and since we are in tax season is this considered an expense one can deduct? The fee I am thinking of will be about $600-750 for a group that will end up leasing the new house.

Any thoughts will be greatly appreciated.

@David London

I have student housing in Kutztown and pay $100 for anyone who can find 3 tenants to fill the apartment for the year. It works sometimes and I use it for anyone renting with me now, past or if they have a fully executed lease for next year. I write it off as property management fee.

In PA it is prohibited to compensate an unlicensed person to effect a real estate transaction.  So you cannot pay a referral fee to a tenant (or gift them something or otherwise compensate them) for referring tenants.  Same is true in real estate sales and management.  When you do compensate a licensed person that income is paid directly to their broker, never to them; the broker pays the licensee based on their agreement.  Other ideas: Offer a unit improvement for the referral (ceiling fan, tiled floors, carpet cleaning, light fixtures, accent wall), Offer a donation in their name to a non profit they support, just simply ask- most people want to help.