Negotiating On-Site Employee Residence Discounts

Last modified on November 8th, 2018

Recruiting and onboarding exceptional front line talent is perhaps the most important investment property management companies make. Best-fit employees understand the value of superior customer service, embrace opportunities for personal and professional development and growth, and typically present that all important first impression of your company to prospects and clients.

When you find good employees, you want to do everything you can to keep them happy. You may not live in a state or municipality that requires on-site managers or maintenance personnel 24/7, but many property managers prefer to offer employees free or discounted rental rates to cover after-hours emergencies.

Negotiating lease rates can be challenging for new property managers.

Negotiated discounts accomplish three primary goals. First, they give employees an opportunity to save money – something almost everyone will appreciate. Second, the company generates revenue, albeit under market value. Finally, on-site personnel bolster confidence and a sense of security for owners and residents.

Required, Encouraged or Allowed

Employee-residents fall into one of three basic categories: required on-site residency, encouraged to live on property or allowed.

Depending on the role each employee assumes after hours, you may choose to include paid housing and a benefits package or offer a discount. For example, if your property management company contract with clients stipulates 24-hour coverage, you may hire a resident manager or negotiate a contract with maintenance personnel to meet your contractual obligations.

Required residency contracts often allow employees to customize their units – either at company expense or as self-pay improvements. The benefit package may include paid utilities, renters insurance, free storage, private parking and other perks.

Encouraging employees to live on-site for after-hours coverage is usually less burdensome financially. On-call personnel agreements typically include a rent reduction of 20%-30% based on market value.

When negotiating discounts, it’s important to realize that discounted rates don’t negate your responsibility to comply with labor laws governing overtime pay. Before finalizing a work-residency contract, check with your accountant or attorney to make sure your agreement won’t expose you to legal challenges if your employee quits or is otherwise terminated.

Allowing support staff – non-essential personnel – to live on property isn’t feasible for all properties or every employee. This is the most challenging situation for many property managers and requires carefully screening employees before initiating this policy.

Let’s say you’re offering a 20% reduction to a single employee who wants to live on property. If you’re paying your employee $25,000 and their apartment market value is $1100, they probably wouldn’t qualify as a resident off-the-street, so to speak.

The rent to income ratio differs, naturally, depending on your geographical location. The New York Times reported that rent affordability is sharply higher on the West Coast, with Los Angeles residents forking over almost 50% of the gross income to pay rent in 2013.

Most apartment communities require at least a 3:1 ratio – $3300 gross income per month to qualify for that $1100 apartment. The point here is that while you may want to provide a valuable, morale boosting benefit to your employee, you could be creating a financial burden, which could eventually lead to stress and dissatisfaction in the long-term.

Resident managers and on-site maintenance personnel help property managers keep a closer eye on owners’ assets.

Before negotiating employee discounts, do your research. Talk to other managers in the area about their community policies. Remember to consider how your policy will impact your employees; don’t assume a rent discount is enough to encourage your maintenance staff to work day and night without additional compensation and scheduled time off.

Bottom line, contracts for on-site resident-employees should be beneficial for both parties. That’s the only way to bolster employee morale and boost retention rates for your front line staff.

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