Marketing and Sales Tips

Resident Referrals Might Be A Good Source Of New Tenants

by Marvin Levin

Small apartment projects on a busy street tend to keep good occupancy just from the drive-by traffic. Large apartment projects, on the one hand, offer the advantages of economy of scale; and, on the other, the burden of replacing move-outs. Even with a good location, it is not uncommon for large apartment projects to suffer from uncomfortable vacancy.

Referrals from existing tenants are ordinarily not a major source of new tenants, but it can be a significant source if handled correctly.

I cannot remember any occasion in the past 30 years that a manager of a large apartment project did not report having a referral program for existing tenants. Depending on the rent level and market conditions, a bonus of $100 to $200 for each tenant referral was common.

However, with only an occasional exception, I have not seen referral programs promoted with a “full court press.” To illustrate, I will present an outline of an aggressive referral program that resulted in a significant increase in referrals:

1. The management announced to the residents by a notice in the monthly news bulletin that management was tired of giving the local newspaper advertising dollars in order to secure new tenants. Instead, it would increase its tenant referral fee from $100 to $150 (the dollar amount cited is for illustrative purposes only).
   
   
2. At the end of the year, a Christmas bonus of $___ would be paid to the three residents who had secured the largest number of referrals.
   
   
3. Notices were posted in the laundry rooms reminding residents about the referral program.
   
   
4. After a new tenant arrived, the property provided him or her with a business card. The new residents name, address and phone number appeared on one side and a map showing the location of the property was on the other. Then, the tenant was invited to hand this card over to its prospect and tell the prospect to present the card in exchange for a designated benefit (such as a tangible gift, a waiver of some or all of the security deposit, help with the move-in, etc.).
   
   
5. An item in the monthly news bulletin might acknowledge residents who have made successful referrals.
   
   
6. Depending on local law, a resident might be given an advertising piece that could be placed on their bulletin board at work, indicating that they are a source of special apartment referrals (provided that such does not constitute illegal real estate brokerage activity).
   
   
7. Management establishes an appointment system where the prospective tenant being referred is guaranteed a personal meeting with a rental aide when the prospect arrives.

A “full court press” on a referral program, as outlined above, will not necessarily produce dramatic results. I believe that a large majority of residents are inhibited about making referrals to others. However, a small increment in results might produce a rather dramatic overall result during the ensuing years.

If your project has 20 move-ins with 22 move-outs, it isn’t long before you have a substantial vacancy problem. On the other hand, if you have 24 move-ins with 22 move-outs, it isn’t long before your vacancy is eliminated. It is often said that the difference between success and failure is “paper thin,” and this is one example of that proposition. Good luck!

If you know of a troubled apartment project, please contact me.