As a consultant to the apartment industry, I am asked a LOT, “What’s fair leasing agent compensation? Is their a leasing commission structure you would recommend?”
There is no easy or short answer to this question, so let’s take a round about way of discuss it, and then my next article will zoom RIGHT into what I recommend.
I find it a little backwards when people want to know what OTHER properties or OTHER management companies are doing when it comes to leasing agent compensation. I never say it out loud, but I’m always thinking, “What’s it worth to YOU?” (as owner/manager) AND, “What’s it worth to THEM?” (your leasing agent/leasing specialist) What do I mean by that?
FIRST, let’s first talk about the REAL problem – VACANCY.
I don’t have a vacancy problem!
Well, then, you shouldn’t worry about leasing agent compensation then!
OK, OK. Let’s talk about vacancy…
TO make it easy, let’s say we’re talking about ABC Apartments. They have 100 units. Their average rents are $1000.00/unit.
Prior to the rental market taking a downward turn, ABC Apartments has been running along great, apartments never took very long to lease, and they had been at 97% occupancy for many years.
Fast forward to today, they are at 88% physical occupancy, which means they are at 12% vacancy. All of the sudden, they are struggling with just staying ahead of the renewals and turnover. Increasing the occupancy in the midst of the resident turnover looks very daunting.
Let’s do the math.
At 97% occupancy, the vacancy loss is:
(Average Rents) x (# of Vacant Units)
$1000.00 x 3 vacant units = $3000.00 of vacancy loss monthly. This is what they are used to operating at. Annually (x12), this amounts to $36,000.00 of annual vacancy loss.
TODAY, at 88% occupancy, the vacancy loss is:
$1000.00 x 12 vacant units = $12,000.00 of vacancy loss monthly. Annually (x12), this amounts to $144,000.00.
The different in vacancy loss monthly is $9000.00! ($12,000 – $3000) And annually, the difference is $108,000.00! ($144,000 – $36,000)
How much does the $108,000.00 mean to the site? The Owner/Investors? The manager? Now that we have things in perspective, it brings up a WHOLE bunch of other questions, like:
- Do you have the right staff in place? If your maintenance guy is doing showings – you may have a problem.
- Do you have a plan in place for resident retention? If you have vacancy problems, you HAVE to have a plan in place to close the back door to your vacancy problem.
- Is your staff properly trained? Not just in customer service, but in closing on leases?
- Is your staff properly motivated and positioned to succeed? (This question leads into the real TOPIC: What’s a fair Leasing Agent compensation package?
Do you have other questions? Other considerations? Leave me a comment in the COMMENTS section!
My next blog article, will discuss different leasing compensation programs, and how to pick what works best for you, your site, and your staff.
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-Daisy Nguyen in Minneapolis, Minnesota MN
CEO/President
Business, Operations & Marketing Consulting to the Apartment Industry
Web: RentSoda.com Email: Daisy {at} RentSoda(.)com
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