Jacqueline Kyo Thomas
When most people think “real estate agent,” they immediately envision a person who helps with buying or selling property, but that’s not the whole truth. As a real estate agent, you’re not limited to those two options. You can work in all stages of real estate, which includes assisting with rentals.
Now you may be tempted to think that working in rentals as a real estate agent isn’t a legitimate use of your time and talent, but that’s simply not the case. Rentals have always been a steady source of income for agents. But it’s become even more important recently, and many agents have shifted their focus to exclusively working with rentals.
Why the change?
The rental market has grown over the past couple of years in response to several factors, including the shrinking inventory of available homes on the market, the record high asking prices of properties that are listed for sale, and the stiff competition that drives those asking prices even higher. Hopeful buyers are finding it next to impossible to find decent properties within their price range. And when they do, they’re often outbid, and not necessarily by another human. The housing market has been taken over by quite a few real estate companies. These companies buy up houses at top dollar and then list the same properties for rent. This is happening all over the country, not just Massachusetts. Many buyers simply can’t compete with the buying power of real estate corporations. So, instead of buying, they rent.
And that’s where you come in.
As a real estate agent, you have the ability to help your clients find the best property to meet their needs. While you may not be helping a buyer purchase a property, the end result is still the same: You’re helping your client move into a space that they will love.
You can assist homeowners, too. As a rental agent, you’ll help your homeowner client find the perfect renter for their property. And because this can be an ongoing arrangement, you’ll have the opportunity to build a strong business relationship with them.
Why Should Real Estate Agents Work With Rentals?
One of the biggest hesitations you may have about working in rentals is about earning potential. Let's start here.
It's absolutely true that the rental market is different from the selling market. One glaring difference is that you can earn more money selling a home compared to renting the same home — by as much as 90%. However, it's also true that you can make more money over the course of a year when working exclusively in rentals. Here's why:
Selling properties can take a lot longer than renting properties. It's considerably easier to rent properties than sell them, simply because there are fewer requirements, checks, and procedures involved. When you work in rentals, your commission will be a fraction of the commission you can earn in a purchase.
For example, your commission may be $30,000 for the sale of a home, but $3,000 for the rent of the same home. But, since there are more renters and rentals on the market, it will be a lot easier for you to find 10 renters for similar properties than it will be to find just one buyer who can successfully win the home. Sure, you may find a buyer, but there’s no guarantee that they’ll actually purchase the home. They may be outbid, which is quite possible in this market. And that’s if you get a client who’s actually ready to buy.
The bottom line? Working in the rental market is an easy and sustainable way to guarantee your ongoing profitability as a real estate agent.
Learn more about real estate agent salary and commissions here.
Working With Renters and Owners (Best Practices for Real Estate Agents)
Here’s what you should know when working as a real estate agent with renters or owners:
Specialize in Rentals
The first step of getting rental clients is to advertise yourself as a rental agent. Fortunately, you don't need to do any additional testing to become a rental agent. Your Massachusetts real estate license covers all aspects of real estate, including buying, selling, and renting. You can choose to represent either renters or homeowners, or you can do both, although many agents choose to work directly with the homeowner. This ensures that the agent will receive their commission when the time comes.
Educate Your Client
A lot of people, especially renters, may not know what they're looking for until they come to you for help. It's not uncommon to deal with a homeowner who's ambivalent about selling or renting. As a real estate expert, it's your job to educate your client on the current market and give them advice to help them identify what would be the best option for them.
The same is true for renters. Some renters may feel embarrassed by the prospecting of renting because they have old school ideas that they should be buying instead of renting. You can help them work through that limiting mentality and see the wisdom of long-term rentals. Use what you know about the market to provide clarification and direction.
Leverage Your Professional Reach
Where can you go to find quality tenants for your rental property?
As a state-licensed real estate professional, you have access to resources that the general public may not be privy to. This includes the Multiple Listing Services (MLS) in your area. You can post rental listings to the MLS in an effort to attract more serious renter leads. This move can get your homeowner client a lot further than posting ads on Facebook or Craigslist. It’s one of the best ways to find qualified renters.
Additionally, you can leverage your extensive professional network to find a renter. Send out an email or make a post on social media about your rental property and ask your network to share your posts with others.
Negotiate Your Commission
When you work as a rental agent, your commission isn't set in stone. You have more flexibility because you can negotiate your commission directly with the homeowner. For the sake of simplicity, most rental agents agree to a commission that's equal to one month of rent. However, if you are working with a corporate client who has a lot of properties for rent, you may wish to give a discount to ensure that you become the go-to person for handling their rentals. That means that they'll reach out to you first to handle everything related to their rental, including listing, marketing, and screening potential rentals. Most agents do not receive an additional fee if the tenant decides to renew their lease.
Be Prepared to Handle All Aspects of the Rental Process
Some agents only assist in finding tenants for a property, but if you offer more services, you will be able to make ongoing profit from the same property. Many homeowners are willing to pay a real estate agent to be a property manager. A property manager collects rent, monitors and fulfills maintenance requests, and ensures that the property is taken care of in the owner's stead. They will also manage all documentation, including leases, insurance, maintenance requests, and records, and more.
If you do sign up to be a property manager, you can often charge a fee of somewhere between 5% to 10% of the monthly rent for your services, depending on your market and the specifics of your responsibilities. This may be a meager amount compared to the buying and selling of homes, but remember that it's far less work. You may only work for a few hours a month on a property but earn hundreds of dollars in exchange.
Final Thoughts
Working in rentals can be a lucrative move for real estate agents. In fact, the rental market has become even more important in recent years. By getting familiar with and actively working in this market, you can ensure a steady stream of income.