Doing something interesting for resident referrals

Greetings! My company just reviewed our 2009 resident referral payouts and I have just one word: GULP! Big dollars for sure.

I was wondering if anyone out there is doing something cool or interesting (like unit upgrades) as part of their standard referral program. And, if you're rewarding residents with cash for their referrals, how much are you paying?

Thanks!

Heather Campbell
RedPeak Properties

Heather, here's my secret. Only pay residents $100 for referrals. Keep in front of them, and remind them constantly. From my experience the dollar amount doesn't matter. People will refer others regardless as long as they like the property and people. Just like concessions, it's not the $ that matters. It's the perception.

Our referral amount varies on our occupancy. Right now we are only 93% occupied so we are offering a $300 referral bonus. When we were 100%, the amount was only $100.

Who says that resident referrals have to be 'cash back'?

Has anyone considered offering an upgrade to their unit? Offering a discount on rent for a future month? Give 3 (or 4) referrals, get a new TV?

Is anyone limiting the maximum a resident can receive in referral bonuses per year?

I would prefer to do a concession off of rent or an actual item like a TV, but our referrals have always been cash back, and unless residents ask for something different, my corporate office probably wont change it.

Currently there is no limit, but no one has every asked for more than one, so if one person did get a lot of referrals, we might look into setting a limit to keep from going broke.

Referrals... Call me old fashioned but the first step is to ask for them. In the past I worked in the mortgage industry and paying for referrals is a violation of RESPA regulations. Many don't get any or just few but those who did are taking specific actions to get them.
1/ Insure that the experience is exceptional
2/ Ask for feed back about their experience
3/ Ask if they would tell their friends/ family or COI about it?
4/ Invite them to do so
5/ Ask if they know of someone who maybe interested by your services
People who send referrals are usually more interested in looking good than money. That is why people are more likely to refer doctors and lawyers. Let them know that your will make them look good (guarantee it!)

A hand written thank you note always had great impact and a gift certificate inserted very welcomed (under $50)

@ Frederick, I agree, ask for referrals! Nearly every sales industry does this. Including my own realtor. I don't understand why it would be any sort of violation to pay for them, either with cash or a gift card. A gift card is just as much a payment as a check.

Today I'm 'paying' my residents with donuts and cards to stop by the office so I can wish them a happy valentines day.

:cheer:

We just offer discounts off on rent, but have discussed doing a menu where they could pick a few items such as a free carpet cleaning, or free painting of an accent wall, and give a choice between discounted rent, and one (or a few) of these other items. Just a thought. I suspect discounted rent will still be the most popular option though.

This seems like an age old standard industry norm ripe for some re-imagination...

I think if you build the right community catering to just the right number of evangelists - you could reallocate the expense to creating outrageous and over the top resident experiences that are raved about. Raved about to the point that referrals happen by default. The payment to residents comes in the way of being a part of something cool...bigger than self and more important than money.

Now that sums it up much better than what i was explaining mr. brewer. i would even contend that today if people eliminated or reduced their referral fee that they would still get that same number of resident referrals. What you give is almost irrelevant. The only reason you give something is because it's easier to track and something has to grab people's attention. Lower it to $50 or just a gift card to Chili's and you'll still get the referrals. Who's bold enough to to try it? My prediction ... no one.

Now that I think about it, I think I'm going to lower ours from $100 to $50. Here's my prediction, we'll have more resident referrals this year than ever, and I'll have reduced the investment on that line item. If I can get rid of the blah.com fees as well we'll really be saving some marketing exp. dollars.

Here's my questions, why do so many people think they need to spend more or give something different? Put yourself in the shoes of the customer. Would you be more likely to refer a friend if the fee was $200 vs. $100? $100 vs. $50? What's your OMG point with a prize for referring? Are you giving more than $200 as a referral? How do you think that makes your leasing teams feel when they make $50 commissions?

Just food for thought here. Is it the referral item/prize, or it the fact that you do something? I think there is an OMG point for the prize, but that gets expensive. I said this a couple weeks ago on my fb page, "Gimmicks work, they're just really expensive." It's your call I suppose.

M -

How is life treating you post dud-bowl?

I concur with your thoughts and step up to meet your experiment.

How about this - I will post the in place stats for 09' right here on this site for my same store stuff and then revisit this post each month to post the results of the pared down referral fee. Should be fun.

As I thought through my portfolio - I have a few properties where we do not market resident referrals as we do not have the cash to do so. I am thinking of one specifically that is so far over levered that it barely cash flows. We have zero budgeted for marketing and do everything via Craigslist. It is in my top five occupied props thus far in 10'. Moreover - we give away zero concessions. Now, I would be the first to say - this is all about the amazing, stellar and downright compelling property manager master that runs this deal. She just gets it - and as such "crushes it" to steal your favorite guru's term.

All that to suggest - we re-image it or write it off via the - that is so last year pile of ideas to resurrect thirty years hence.

Looking forward to hearing what comes of your effort.

M

Mike;

I am confused (these days, it's not taking much); but if that particular property is maintaining it's occupancy, and is not giving concessions (because occupancy is not a problem), how is it not producing a positive cash flow?

Something isn't adding up; it's like when I worked for a major retailer(who shall remain nameless) that had NEVER shown a profit..... after a new management team was brought in, an investigation began. What was discovered was frightening; we had a huge internal theft problem, had to fire and prosecute 18 people... this was not product, and it was not little. The new management was given 6 months to save it, or corporate was going to close the location (the lease on the building was coming due anyway). It got so bad that the regional loss prevention manager made that store his office. We got restitution, put controls in place, and had a profit within 4 months.

I just don't get the fact that the property in your portfolio is not as profitable as others, while maintaining occupancy. Something smells funny about that. I was at a tax credit property where residents were receiving assistance from county programs and these county programs told US how much rent was going to be, how much they were going to pay, and how much the resident would be responsible for. Is this the case?

It's a great observation - trust me, we have been through every aspect. This is just our 7th month with the deal. The short answer - as I eluded to earlier - is that the in place debt obligations are such that it does not kick off much cash. Now that we have it occupied, it meets it obligations with out owner contributions but we have to keep a tight eye on every line item.

Hope that helps -

M

You didn't say that you just took that property into your portfolio 7 months ago. That tells me that you must have inherited a bunch of problems (one of them may have been occupancy); now it looks like the problems have been resolved. This is a good thing. I suspect the NOI and cashflow will be dramatically improved at the 12-18 month mark.

Good luck... Let us know how things shape up!

Thanks for that. From the professional leasing and marketing end. Why do they pay a resident more than an agent. We give $200 and I get $30.00 for a leasing bonus.

I agree people have a natural interest in having friendly co-workers live near by for ride-share and neighbors who make them feel a sense of belonging. They will refer if they are happy to anyone they would welcome as a neighbor.

I think it would be better to offer a $25 gift card lunch on us for you and our new resident. Solicit local business owners to sell you discounted meals packages, spa days, one day getaway accommodations etc as treats for your new and referral resident and advertise that business in your newsletter for the co-op price reduction or give-away. I would even offer to put an upgrade item in the referrals home.

Its just overkill, throwing that much money at a referral.

I agree, paying a resident a referral fee that is greater than the potential commission you would pay staff is wrong; and could affect team morale negatively if commissions are involved... If your team is on commission (at least partially) and you have the choice of paying the resident a $200 referral, and the team member a $50 commission; I would reverse them and pay a $50 referral to the resident, with a $200 commission. If you are paying residents to do the job of the employee, what does that say about how you treat your employees?

If resident referrals is a goal, why not make a contest out of it? Let's say you have an annual drawing for a nice prize (trip for two to Las Vegas, new TV, etc.) you can 'sell' entries on the following basis: 1 entry for each resident referred that signs a 6 month lease, and 2 entries for a 12 month lease. If you wanted, you could connect this with local community giving (local animal/homeless/domestic violence shelters); you could also sell entries for monetary contributions (1 entry for each $25 contributed). If employees want to contribute, they can participate as well; but not for referrals (you are already paying them for that).

I think resident referrals are a great thing but many communities do not realize there are local statutes that deal with resident referrals. In Arizona, resident referral fees shall not exceed $100 and many communities pay more without realizing they are not in accordance with the law. Read more about the statute at my blog post www.aptfind.com/2010/02/paying.html

Great comments and ideas. Thank you. Am considering impact of $ 50 rent credit to tenant referring and $ 50 rent credit to the referred tenant. Thinking each will appreciate the reduced rent for the month and be constantly looking for that new prospect to reduce the rent for the next and subsequent months. Anyhow, just thinking. Thanks again.