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Uncovering the ROI of Working With Rentals

Uncovering the ROI of Working With RentalsUncovering the ROI of Working With Rentals

Summary

Agents often take a narrow-minded view of working with renters and landlords claiming little ROI. These relationships can keep the client pipeline full bringing steady ROI and homebuyer referrals.

There are almost 20 million properties considered rental properties in the United States. Real estate agents often view rental properties as hindrances that cause frustration instead of earning opportunities worth their time. 

Who can blame them? Historically, landlords and property management companies avoid listing their rental units for rent with a licensed real estate agent because they don’t want to pay a fee. In short, real estate agents see working with rentals as a poor return on investment (ROI). 

Why agents must change their mindset about rental properties 

Unfortunately, this mindset causes agents to leave money on the table and miss opportunities to start relationships with future homebuyers. Working with rentals can allow agents to develop consistent earning potential when the buying and selling market slows down. 

Agents often take a narrow-minded view of working with renters and landlords, thinking they have no time to dedicate to these clients. This can be true when the buy/sell market is busy, and they assist buyers and sellers. The ROI for their time in a buy/sell transaction over a rental transaction can equate to more income at the time, but it’s not necessarily steady. It takes time to have new listings and showings in the pipeline, and the typical 30- to 60-day closing causes a significant delay between finalizing the sale and getting paid for it. 

Most rental transactions are closed within a week or two. It rarely takes a month to screen an applicant, collect all the fees, and have the potential tenant sign the paperwork to move in. In fact, with proptech tools, like the property management tools from RentSpree, agents can quickly have tenants fill out an online application and get permission to start background checks. These tenant screening tools can be filled out in a matter of minutes allowing landlords to see the documents and make a decision within 48 hours. Landlords can also approve or deny applicants and provide the proper documentation regarding their decision within a few minutes. 

Also, when real estate agents start working with renters and landlords, they find they can focus on this efficient, repeat business and offer thorough screenings for high-rent properties to earn decent commissions. Depending on their goals, agents could work with buyers and sellers while the market is hot and renters during a slower part of the year. 

Misconceptions real estate agents have about working with rental properties

The rental property market differs from real estate's buy/sell market, and many agents feel they lack the knowledge or tools to work in the rental market. However, these ideas lead to a poor perception of the income potential in representing a rental property. With the right tools and attitude, real estate agents can earn a good living assisting tenants and working with landlords and property management companies. But first, they must get over their current ideas and stop making excuses to avoid working with rentals.

Common excuses that real estate agents use to avoid working with rentals

A RealTrends survey completed in partnership with RentSpree revealed that 7% of the included real estate agents cited time limitations as their reason for staying clear of rentals. “There are many reasons I don’t work with rentals, but the number one is my availability,” said Angela O’Hare, Home Realty Center, Las Vegas. “I simply do not have the time to work with people who want to rent here in the Las Vegas Valley.”

Others find that some landlords and building managers will not pay a commission to a renter’s agent or surmise that the commission is too low. The RentSpree + RealTrends study showed that 50% of the surveyed agents claimed that the commission was too low for the time and effort required to lease a rental property. Laura Agado from Apartment Management Magazine said, “I get annoyed when real estate agents call about a rental listing because I won’t pay their commission.” 

43% of surveyed agents claim that a lack of knowledge of the rental market keeps them from working in that space.

Many agents forget or don’t realize that their current business structure might already be set up to work with rental properties. If an agent already works with real estate investors to buy and sell property, they could also offer their services to fill the property with a tenant when it is move-in ready. Since they have already built a relationship with the investor, it is an easy “yes” for the investor to hire them to help. This can be an excellent option for adding income to your business by establishing yourself as the go-to agent for buying, selling, and renting out properties in the area. 

How can real estate agents uncover the ROI of rentals? 

As we’ve said, working with rentals can bring a steady income and a good ROI, and other agents agree. According to an interview on the Inman Connect Panel, Nina Dosanjh stated, “There is profitability being a leasing agent; otherwise, they wouldn’t be doing it. For example, in San Francisco, agent compensation for delivering a signed lease is usually a full month’s rent. In San Francisco, some units rent for up to $20,000 per month. The problem of representing landlords and showing units to potential tenants arises because not all available units are in the MLS. Agents are not always connected in the rental space and have difficulty providing their client, the renter, with reliable information about all available rentals.” 

Not only can relationships with landlords and property managers keep the client pipeline full, but renters can also help real estate agents by referring friends and family looking to purchase a home. By offering rental leasing services, you instantly expand your circle of prospects.''

If you are a newer agent and not yet established in an area, assisting tenants with rental placement is a low-pressure way to get your name around town and your foot in the door. This will help you expand your circle of local contacts as you negotiate for tenants with local landlords. 

Earn a great ROI and make your time worth more

Real estate transactions take time to work through. This is true for the buy/sell-side and the rental side. However, time constraint becomes an added challenge when real estate agents fail to leverage technology within the rental space the same way they would on the buy/sell side. 

When a renter falls in love with an apartment or single-family home to rent, they want to apply immediately, especially in a competitive market. Yet most landlords still rely on paper applications. This causes a time gap of three to seven days between when the landlord receives the application and when they contact the tenant about their decision. With technology, this process can be hastened to 48 hours and result in happy tenants and landlords.

How technology can boost the ROI of rentals

Property technology (proptech) enables real estate agents to set up a listing cart to show properties to tenants through the MLS and lets them quickly help renters fill out online applications. Proptech can facilitate payment of the tenant screening fee, pass on the paperwork to the landlord as soon as it’s completed and allow the tenants to be notified of a landlord’s decision within 24 to 48 hours of applying, cutting two to five days out of the typical manual application cycle.

Agents don’t need to handle time-consuming paperwork on a transaction's front or back end. Renters can fill out the online application, pay for the tenant screening, and receive a response electronically without anyone needing to hand deliver or mail any forms. Landlords benefit by having a new tenant in a few days instead of weeks. 

Using proptech will boost hourly earnings and an agent’s ROI exponentially

Proptech solutions, like the Real Estate Agent tools from RentSpree, simplify working with rentals by providing agents with a complete set of easy-to-use digital property and tenant management tools. Hands-on training is also provided, which gives agents the necessary knowledge to work with rentals safely, effectively, and profitably.

Power your rental business to work smarter, not harder, with RentSpree’s real estate agent solutions. RentSpree offers robust tools like listing pages and tenant screening to keep your ROI growing.

Cap Rate Calculator

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How to use

Enter information in the boxes below to calculate the comparative value of a piece of property in order to determine if it would be a good investment for you.

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Commission Calculator

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Rent to Income Ratio Calculator

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