Do you provide incentives to your tenants for recommendations?

Question

Greetings my BP fellows,

You know how when you are driving you tend to think about different things that can add value to your business. That saying, "Give and you shall receive."

So I'm driving and I ask myself, "How common is it for a RE investor to give incentives to their current tenants if they can recommend someone to occupy your empty unit and lives there for a year?" Well thanks to @Joshua Dorkin and his great team, I can pose such question and hopefully create a fun and educational discussion.

Look forward to hearing everyone's unique feedback,

Damir Kamber

Paul Ewing · Answer

Check with your state real estate commission.  In most cases this would be illegal.  In Texas you cannot give "valuable consideration" which is defined as a gift valued at more than $50 or cash or equivalent (rent credit) of any type.

Dan Perrott · Answer

@Damir Kamber We currently offer a finder's incentive to our current tenants for a recommendation of a tenant that passes our rental criteria, successfully completes the application process AND rents (signs 1 year lease) from us.  The reward is given after the new tenant moves in and pays the second month's rent.  We have signed a few good tenants through this process.  We feel it is a small price to pay for good, solid tenants.  The incentive reward is 10% of a months rent.

Bryan N. · Answer

@Damir Kamber

It is a good question.  I own a townhome that literally everyone in that cul de sac is either related or friends except for a couple units.   The "community" feel keeps them all there.  When my current tenants move out I'm considering exploring this option to encourage a long term tenant.  I'm curious to see if others approach this tactic and how.