I am 100% convinced that leasing commissions need to go away.
They are a long survived sacred cow and serve no real purpose in the way of motivating people to lease more apartments or more importantly – serving people.
My solution – pay people a fair wage and tie 10% of that to your companies year over year same store revenue growth or some like kind metric.
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I have never understood why we pay a leasing or noi bonus. It’s the job of the onsite teams to lease apartments and generate revenue. This is of course with the assistance of the corporate office. Why give a bonus when you just gave a months free rent away?
Honestly I dont think you have been a leasing consultatnt before. Leasing is sales and just like any other sales position you need incintives to promote higher sales. If you go to a flat pay rate then everyone will just take walk in traffic and I guarnteed emails, follow up, craigslist adds, and phone calls will go down and so will occupancy.
I started out in this industry as a leasing agent in 2008. I
spent a year leasing a property with no leasing bonus and kept it up in the
90’s when the other properties around me were dropping to the 80’s. In 2009 my
company offered bonuses and honestly the money did not make a dent in my pay
check or my numbers. I still kept my property in the 90’s. I have seen leasing
agents within my own company receive a decent leasing bonus and it does not
motivate them at all to lease apartments. We are hired to lease apartments
which includes the follow up’s. Now I’m all about renewal bonuses as it is
harder to retain residents.
Well I dont know what your pay rate was at the time when you were recieveing bonuses but I dont honestly believe you when you say that more money did not motivate you to lease more apartments. Now You started without the bonuses but those of us who are used to getting the bonuses it is a huge driving factor. Without my leasing bonuses I would not be able to live and probably would not of accepted the position. If we go to a flat rate then what is the incintive to do more than the bare minimum? Maybe your leasing bonuses are not high enough to motivate your agents to lease. If you take the bonuses away do you think they would be more motivated? What else would you offer them as an incintive?
I would like to chime in on this one. If I were considering making a change today; I would take your commissions for the past two years as a total. Let’s suggest for discussion sake that you make $7,200 over that two year span. I would divide that number by two to get an average yearly bonus number. In this case $3,600. Then I would divide that number by 2080 (the number of hours that you work in a calendar year). In this case that would equate to $1.73 an hour. I would then adjust your current pay rate up by $1.73. In essence, you would net more. And here is why. Bonus income is taxed at a different rate that hourly wages. That $1.73 would act more like $2.00+/-.
So here is a question for you – would you rather have a steady predictable income vs. a – make more money in the summer followed by less in the winter scenario?
Let me stress this one point – my idea is not to take you backwards. It is rather targeted an making you even more money and on a more steady basis.
Thoughts?
M
I
understand the math behind the proposition. However, the consultants would
rather keep the commissions. Look at it from our stand point if you average out
the pay rate we are only getting 1.73 raise, so we will only see a small
portion of our bonuses added to our pay checks. Which I can guarantee will be
spent on pay day. Compared to now when we get one lump sum of $300-500 at the
end of the month. Sometimes my last pay check of the month might be as much as1,
500 which is a large lump that I can use for things that Cost large amounts.
Also I work at a large property so my potential earning is high with the
bonuses, so I could have a bonus up to $700 which could mean a new Mattress or
down payment on a secured credit card, or all new clothes for my kids for school. I understand that the math is the same and we
would not technically be losing money but the impact of that change would make
us feel like we are losing a lot. It is hard to save money and take care of
loans and/or raise a family. Just like everyone else most of us are living pay
check to pay check and we need those larger lump sums to catch up. I do have
another question, if we did lose our bonuses how would that rate be evaluated?
I am asking because what if we have a year where leases are low and we get a
small pay raise and then the following year we double our leases, then what? So
I guess I am asking if they would be evaluated yearly.
All good points.
Item of note on my math: It’s back of the napkin and very conservative. If a person averages more along the lines of $700 a month or $8,400 per year then the increase would be $4.00 an hour before you consider taxes.
And, I would suggest (understanding that this is a hard habit to start) that budgeting differently on a personal level would be the key. And budgeting brings along a whole set of different spending behaviors that are sometimes tough when attempting to make ends meet. I do get that. In the respect – you would literally make more money at the end of every year than you do today if commissions were not in the picture.
To speak to your question at the end – remember the very end of my initial post suggests that you would still share in bonus that would be predicated on year over year earnings improvement. Your increase would be driven largely on the financial performance of the property as a whole. Not your lease/sales/renewal production. And yes, it would be evaluated at the end of each year.
M
I’ve always thought that renewal bonuses should be much more important that leasing commissions. The best way to increase the property NOI is to increase resident retention. This not only lowers expenses, but allows for effective rent increases. If you renew more leases, you need fewer new rentals thereby no longer being forced to offer lofty move in discounts and free rent.
I agree in renewal bonuses but decreasing lesaing bouses will cause the property to paltoe and not increase. Anyone in the industry can agree that we have more people that “float” or change apartments often. honestly in these economic times I dont think peopleare staying in there apartments as long becuse they are always looking for the best deal, and/ or cannot afford there apartment at renwal because the rategoes up. So I dont think depending on renewals is a good Strategy. Niether is cutting back on the face of the community because thats what gets people in the door and gets new revenue in the door.
Becky
I promise I am not avoiding you. Shall we have lunch next week. I am open on Tuesday. I can meet as early as 11:15. Let me know if that works. Otherwise, I can do it the week after.
Thank you for chiming in on this topic – it’s a focus for me in 2013. That is not to suggest that I would make a wholesale change but I think there is a different way to think about this.
Take care and would love to see you here more often. Really value your feedback and contributions.
M
I as well, have never understood why we pay out leasing commissions. I truly believe in my heart that my leasing team doesn’t work any harder to secure a lease for a commission than they do if they didn’t receive one. Leasing apartments is their primary responsibility, and if you have the right team in place, pay them a fair wage and encourage them, they will continue to do what they’ve always done…lease apartments.
LZ!!!!!
Thank you for taking the time to chime in on this one – I think we struck a nerve. And that is a really good thing.
As a leasing consultant the thought of abolishing the leasing bonuses is so dissapointing and would make me change positions. I totally disagree with management on this topic. Having a bonous for each lease is the driving factor for leasing. I think that it is obvious that each leasing consultant is diffrent and has diffrent work ethic, so if everyone is paid at the same rate then what is motivating to lease more. A flat pay rate just encourages everyone to do less. I depend on my bonouses to provide for my family, and I work hard for those bonouses and there fore I make more money. If I was just paid an hourly rate then it doesnt really matter to me how many leases I get for the company. If we did go to an hourly rate it would probably be like 2 dollars more than our rate now and then no bonouses NO THANK YOU! Also the potential for larger raises is un appealing as well because honestly I dont trust that I will recieve a large enough raise to make up for all the potential earinging that i have with the leasing bonuses. If anything the comapny should raise the bonouses and offer more incintives to lease to increase occupancy. I think a flat pay rate is a terrible idea and I know that my team agrees as well as many other leasing consultants.
I strongly 100% disagree as a leasing consultant that leasing consultants bonsus should be abolished I personally love my commission bonsus that I receive. I’ll rather recieve the commission bonsus than get paid a higher rate of pay hourly
Ashley – I really appreciate you taking the time to add to this discussion. It’s an interesting topic to me as I think exactly opposite. And having spent the first year of my career in the leasing role – I can tell you I liked the idea of working from a nice base salary and not having to worry about the ups and downs that come along with being paid on commission. I also found that our teams focus was square on serving people. We didn’t have to worry about rushing through a task that seemingly had nothing to do with sales. We just worked every angle of the property because we were paid well to do so.
I don’t know what the right answer is. I welcome the feedback and look forward to more discussion.
I hope to see you around in the comment section more often in the future.
Thanks.
M
Hello
Mike,
I
understand that the idea of a flat rate sounds appealing and consistent but
really it will be a pay cut to the leasing consultants. The earning opportunity
is worth more to me than a raise in hourly pay. If you raise our hourly pay
rate you would have to raise it over $15 per hour in order to keep us at the
same pay rate. We have more opportunity to do more for the company if we have
something to motivate us. I know that the more I lease the more money I am
going to make so it drives me to do more. I and my team agree that we would
rather take the ups and downs if it means that we are going to make more
overall. Leasing is about customer service, and I can defiantly say that we
offer excellent customer service, and it is an area that I think would also
suffer if the bonuses were cut. I say this because, what is the motivation to
save a lease or try to work closer with clients if we get paid either way. I
think really by cutting the bonuses I think you would lose a lot of leasing
agents and weaken their drive and commitment.
To your point on you and your team providing rock starlet customer service – I concur. I would be hard pressed to find your match. You gals deal with arguably the most difficult property in all of St. Louis (Kari W might argue with that point 🙂 ).
lol Thank you! Yes we do! I think we have a very strong team.
Take a look at the math I put together a couple comments above this one – I would love to get your thoughts on it.
And, thank you for taking the time. It means a ton to me in the way of education and getting better at what I do.
M
I also believe that taking away leasing commissions is a terrible idea. Its our job to lease as a leasing agent but its your job to get residents to renew also. So they are both important factors in keeping occupancy up so why take away bonuses for the leasing consultants when there the ones getting the residents in to renew? Comissions are very motivating when it comes to leasing apartments and would really change my decisions of being a leasing agent.
Hi Ciera – hope your weekend rocks. Thank you for chiming in on this subject. I really value the feedback. Take a look at the math I put together a few comments above this one. I would love to get your feedback on that.
And, I hope to see you back here commenting on other topics.
Thanks.
M
I am 100% convinced commissions are a driving motivator for leasing. In these stressed economic times more is
better. Commissions outweigh a higher wage any day. Leasing Consultants are the front line and can make and break occupancy. Yes, I am grateful to have a job and working for a great company. But the bottom line is earning commission on what you earned is far more appealing than gaining a higher wage. A higher wage is great for that moment. Commissions give leasing the opportunity to earn more money every month. A higher wage temporarily gives you a bump in the beginning, but in the long run it doesn’t add up. Due to the fiscal cliff and inflation, earning commissions is more of an incentive for me to keep on leasing and going above and beyond to earn more for my family and me.
So help me understand this a little more. In my head – commissions have not changed (amount wise) in the last 20 years. They have remained somewhere between $25 and $50 for as long as I can remember. Yet – wages have increased every single year without fail (provided performance proves worthy). Refer to my comment above where I work out the math and let me know what you think.
And – thank you for taking the time to chime in. Feedback is awesome and I really want people to speak their hearts along with their minds.
M
I
understand your view point and again the math makes sense but humans, most
often, do not. Most of us are not very good at budgeting or saving money or we
are but our normal bills are still high in comparison to what we make. I would
rather save my pennies in a jar and cash them in when the jar was full and have
a $100 to get something I needed. Instead of getting a penny a day to put
towards my cable bill. Does that make sense?
It does. And I would challenge think about the post I wrote today – called Why Not Be Great – http://multifamilycollective.com/2013/01/why-not-be-great/ – Maybe this is the year you do become great at budgeting and saving money. Or cutting back on those things that are nice to haves but not necessary as it relates to your bigger goal of becoming great at saving.
Have to tell you – I love the passion in this group. You gals rock and I really appreciate the time you have taken to give me your thoughts.
I hope you and your team subscribe to my blog (upper right hand corner) (and, watch you junk mail for the reply) – and come back for more discussion. This has been amazing.
Thank you.
M
I know how to
budget and have taken personal finance classes and I am not saying I don’t have
any savings but that’s me and there are a lot of different leasing consultants.
However, I budget with my Bonuses and use them for specific things. I just
think that if we are going to make the same amount of money with a raised pay
rate and the leasing consultants are still saying that we don’t want that and
want to keep the bonuses then what difference is it to management? If you’re
still paying us the same amount then what is the benefit for the company
because there must be an underlying reason management wants the change? Again
we are the ones who have to budget on our salary and if we are saying that the
bonuses are more beneficial to us then why change?
LIGHTBULB. I have to speak to my boss about this one. In our office, we recieve commissions. We used to recieve a renewal incentvie but do not anymore. We’re not your typical office, either. Privately owned, one >350 community. There are 7 office staff, 3-4 of which do 98% of the interacting with residents from a Management standpoint. We have very strict selection criteria and the “leasing agent” is incredible, ice to an eskimo sales… but she almost seems TOO driven by the money. Often times throws all the rules out the window and accepts applications that put us in terribly sticky situations (that I end up bailing us out of) and in my opinion, because she’s thinking about her commission. I can’t help but wonder if doing away with the commissions would set her head straight…. Not sure this contributes much to the discussion but boy, Mike….. putting the peices together in my head. Thanks!