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Tenant Referral Fees – Are they Worth It?

Tenant Referral Fees – Are they Worth It?Offering referral fees to your existing tenants is a great way to generate quality leads without having to spend a lot of money on advertising. Before you get to work developing your referral strategy, however, make sure you understand the advantages and disadvantages of doing so. Like anything else, these programs are not one-size-fits-all. What works for one property management office may not for another. That said, let’s take a look at some of the pros and cons of tenant referrals to help you decide what’s right for you.


Expanded network

If you rent larger properties, you potentially have access to a substantial pool of advocates who will go out there and work on your behalf to find you quality leads. You won’t have to do any of the leg work until the leads start coming in. Of course, if you only rent one or two small properties, you’re not going to net the same results.

Quality of leads

As a generalization, most good, honest and reliable people associate with others that have those same traits. So, if you’ve got several good tenants that take care of the property and always pay their rent on time, chances are the leads they send your way will tend to be for people of that same good character.

Foster stronger bonds

When you tap into your existing tenants for help filling your available properties, they’ll feel a stronger sense of importance and community. This can help to foster your bond with your tenants which, in turn, can increase loyalty and reduce costly turnover.

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Greater number of applicants

While an increased number of leads isa potential benefit of a referral program, when many of those leads are not of the caliber you’re looking for, it can actually be more of a hassle. To improve their chances of earning some extra cash, your tenants may throw everything against the wall and hope something sticks, leaving you with piles of names and numbers to weed through but few good prospects to consider.


If you’re going to offer a referral fee, make sure you clearly communicate the qualifications before asking for any leads. In most cases, the applicant must be approved and a lease must be signed before a referral fee is paid out. Make sure your tenants understand that sending someone to simply look at the available property doesn’t count. Otherwise, you’ll be inundated with applicants that have no intention of actually renting and your tenants will be frustrated that they’re not getting paid.

Related Post: Tips for Finding New Property Management Clients

A lot of work

Managing a referral program takes time and attention – especially if you manage larger properties and expect a big influx of incoming leads. Before you launch your program, make sure you’ve got someone designated to keep track of all referrals and who they’re associated with so that nothing slips through the cracks.

Tenant referral programs can be an excellent tool for increasing occupancy and saving you money on your advertising budget, but they aren’t perfect. Understanding the distinct advantages and disadvantages ahead of time will help you make a more informed decision as to whether these types of programs would be a good fit for your business.

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