Growing your real estate business takes time and a refined strategy. A common approach to scaling is buying and selling more houses. However, there is a massive market that agents overlook—rentals.
In fact, some real estate agents don't work with renters or rental properties at all. There is a misconception that rentals aren't worth the time investment. Yet, with the advent of streamlined services, online rental applications, and digital marketing, the number of rental properties an individual agent can represent has gone up.
Evolving Real Estate with PropTech
The digital transformation of the rental market allows agents to work with a higher volume of properties efficiently. In addition, agents can now supplement the smaller commission offered on rentals due to time-saving property technology.
These advancements in property technology are making rental representation an intelligent way to build a business. Whether you are just starting as a real estate agent or looking for a way to expand your current service offerings, rentals provide many benefits. A solid grounding in the rental market can help set you up for decades of success as you create a robust referral network.
Here are a few ways that a rolodex of rentals can set you up for long-term success and growth:
Learn the Local Market
If you are a native of your area or just moved there, rentals offer a tremendous opportunity to learn the local market. This is especially true in hyper-competitive urban markets and with single-family rentals in sprawling suburban enclaves. Working with rentals gives you an intimate view of the local schools and a foundational knowledge of the city that could give Google Maps a run for its money.
One of the most influential selling points for rentals is local amenities, including dining, shopping, and entertainment options. You can develop your reputation as a local market expert by becoming an authority in the neighborhoods where your rental listings are located. That can translate into tremendous professional opportunities and an exceptional local network throughout your career.
Build a Volume Business
When you are focused on listings and single-family home buyers, you are limited in the number of clients you can work with at any given time. In addition, marketing a new listing or taking buyers around to several different properties is time-consuming. This scenario leads to you have little time to market your services, follow up on leads, or communicate effectively with clients.
When you also focus on rentals, you generally represent many units within a particular development or micro-market. Add in PropTech capabilities like an online rental application and a computer-based onboarding process, and you can significantly streamline the process of marketing, approving, and filling your rental properties.
Work With Shorter Timelines
Similarly, a home sale or purchase can take weeks or months to come to fruition. In some circumstances, that long timeline is frustrating to buyers and sellers, causing them to "take time off," especially during holidays or important life events. In the worst cases, you could spend weeks or months working with a client only to end up with no commission to show for it.
Rental timelines are significantly shorter due to streamlined processes, including online rental applications, background checks, and approvals. That means you can find yourself working with a large number of property managers, landlords, and potential renters every month, most of which will result in a commission. Nurture those contacts month after month, and you will soon develop an enviable professional network, a reliable group of long-term repeat clients, and an annual influx of new or renewing renters.
Make Inroads With Investors
One of the best ways to build your real estate empire is through working with investors and developers in your market. When you help them keep their rental properties filled, you motivate them to continue working with you in other aspects of their business. This can include the buying and selling of multiple investment properties every year, year after year.
In addition, if one of your long-term goals is developing your investment portfolio, working with investors puts you in touch with lenders, contractors, and a variety of other professionals who can be of assistance as you start as an investor. You may even find a willing mentor whose guidance can shave years off the learning curve when you are beginning.
Build Your Buyer Client Base
Every renter you work with is a potential buyer. However, you will probably primarily work with them only to help them find their next rental property for the first year or two. During that time, communicate with them consistently about first-time home buying, educate them on their options, and introduce them to a local lender willing to help them crunch the numbers. Soon you could find your renter turns into a buyer.
Now, continue to extrapolate into the future. That first-time home buyer marries or has children and needs to sell the starter condo and move into a larger family home. Faithful follow-up means that you'll be top-of-mind for that and any other real estate transactions down the road. Your goal is to become a real estate agent for life to each of those renters.
Fear of a smaller commission is no reason to reject rental representation — in fact, and it's short-sighted to do so. Instead, you can create the real estate business of your dreams on a firm foundation of market knowledge, professional networking, and lead generation resulting from working with rentals and renters.
How to Verify Tenant References
Now that you've decided to incorporate rentals into your real estate business strategy securing the right tenants for these properties is crucial. Therefore, it's essential to have a solid understanding of the rental application process so you can keep an eye out for tenant red flags.
Like a good agent, you make sure all of your applicants undergo a comprehensive tenant verification process. Using PropTech is a great way to streamline the verification process. While we have covered the importance of screening reports in the past, another paramount factor in verifying your tenants is contacting the references listed on their online rental applications.
Most online rental applications will list a personal and professional reference along with contact information to their current/previous landlords and job supervisors. These are valuable sources of information regarding your applicant, and they can tell you things that your tenant verification reports can't.
But how do you know that the references listed on an online rental application are indeed who they are? Here are some ways to quickly verify your applicants' references.
In addition to obtaining pay stubs and employment verification documents, calling an employer is another excellent way to verify your tenant's employment. To see if the person you call is truly your applicant's supervisor, do a quick Google search and see what comes up.
In addition, you can check out your applicant's company based on the pay stubs they provided and see if the reference they listed on their online rental application is on the website. You can also check LinkedIn.
Another way you can get in contact with the reference is by calling the company's number instead of the one listed on the online rental application and asking for the reference by name. That way, you can get in contact directly with the company instead of the applicant.
Landlords and Property Managers
Just as you use a strict tenant verification system, it is necessary to verify landlords and property managers. Unfortunately, it's pretty easy to have a friend pretend to be a previous landlord. You'd be surprised at what some people do to get a roof over their heads.
Like an employer, you can Google a property management company to contact the reference your applicant has listed directly. Then, call the company directly and see if the property manager your applicant listed works there. If they do not, you should be very suspicious of your applicant.
As for landlords, they can be a bit trickier than property managers. Because they tend to be independent, it is difficult to track down a landlord online. Instead, you have to do a bit more research to verify a landlord reference.
Looking up property records for the owner of his previous property is an excellent way to get landlord information. However, if the landlord listed on the online rental application isn't the person that owns the property, don't worry just yet.
It could be a new owner, or the property owner data you found could be outdated. Call the listed landlord reference and ask if they know the owner on the record. Chances are, they will have some idea of the person that sold or bought their property.
You can also ask some questions only a landlord would know. Again, preface the question by letting them know that you're asking to ensure they're an actual landlord.
Questions like what type of licenses they needed to obtain to become a landlord (which varies depending on what city they are in) or what inspections were necessary to make the property rentable (again, it varies from city to city). A good landlord should answer these questions with ease.