Real estate agents do a lot more than just sell houses. In fact, even as someone who already owns a property and isn’t looking to sell, you may find yourself looking for the services of a real estate agent.
One popular reason to work with an agent outside of a home sale is when it comes to rental real estate. Though it is less common, many real estate agents work in rentals, helping to connect potential tenants with landlords who need someone to rent from them.
There are numerous benefits to working with an agent to find tenants and some downsides as well. In this article, we are going to cover everything you need to know about working with a real estate agent to help find tenants.
Reasons to hire an agent to find prospective tenants
There are a few reasons why you may want to consider working with a real estate agent as a landlord to help find tenants.
For example, if you own many rental properties and don’t have the time to meet with and vet tenants all by yourself, an agent can help you by covering a lot of the work for you. An agent can handle almost every step of the process – from listing the space, communicating with tenants, showing the unit, and more. At this scale, the price of the agent’s services may just be well worth it when compared to the amount of work you are saving for yourself.
You may have also had trouble with bad tenants in the past and want to make sure you are renting to tenants who you feel and your expectations. Though they can’t completely know how a tenant will act once they move in, tenants who go through the process of working with real estate agents for a rental tend to be more serious and responsible on average, so you can be much more confident that you are finding a good prospective tenant for your rented property.
You may also want to consider working with an agent-based on the market conditions of your local area. If there is tough competition to rent out your property and you need to attract tenants in order to have the space filled, a real estate agent can help you market your property and find tenants much more easily.
Marketing is a key benefit when working with a real estate agent on rentals. Agents have access to different networks to market your property on, as well as systems like the Multiple Listing Service to help your rental listings be found more easily.
Another way agents can help is simply with their knowledge of the local market. Since they know what is available in the area and the kinds of people who live there, they will be able to pinpoint what makes your unit appealing to prospective renters and how best to communicate those features. They may also have knowledge about rent prices in the area, allowing you to figure out the best rent price to be both competitive among local rental listings and profitable.
Downsides of working with an agent on a rental property
The biggest downside when it comes to working with an agent is that you lose some level of direct control over your rentals. Though you have the final say in who rents, you won’t get to meet your tenants as early and get to know them as well before they sign a rental agreement. If you are very particular and have time to spare, it may be worth handling this process yourself.
Your agent will also only handle the process of finding a tenant. If you need more work to be handled for you, you may want to consider looking into a instead. Property managers can handle finding tenants (or may hire real estate agents on their own), but will also handle much more of the rental property’s day-to-day requirements like communicating with tenants, collecting rents, maintenance, and more.
Finally, another possible downside when working with an agent is that naturally, they will want compensation for their work. Of course, in many cases, you will get a lot of value for your money, but if you are working with a very tight budget or agents in your area want too much of a commission, you may need to handle finding tenants on your own simply for the financial considerations.
How real estate agents get paid
This may sound shocking, but agents do not simply work in rentals because they love what they do – ultimately it’s a job for them and they will expect to get paid for their services. However, unlike in home sales where the commission split is the standard payment method for real estate agents, this is not the case in rentals. Obviously, with rentals, there is not a large sum of money for commissions to be taken out of so agents must be paid in other ways.
Overall, the way that an agent wants to be paid for working with rentals will vary. Some areas have a standard practice, but not all. In some cases, the tenant who is searching for the space may hire the agent and cover the payment. This is more common in areas with a lot of competition between tenants as some people are willing to go the extra mile in order to find a suitable home.
Beyond that, there are some other common ways that an agent will get paid for rentals. One common payment scheme is for the agent to be paid one month’s rent of the property, usually the first month’s rent. This may even be paid by the tenant directly to the agent. You need to be aware if this is the case as you will be missing out on that income for the month and must account for it.
Another type of payment is a percentage of the lease value. This is not a percentage of a single month’s rent, but rather the percentage of the total value of the rent, usually for a year. For example, if you rent at $2,000 a month, or $24,000 a year, the landlord may request 15% of that value, or about $3,600. Depending on the percentage, this payment will be more, less, or the same as a month of rent.
Choosing the right real estate agent
One of the biggest decisions when choosing to work with an agent to help you find tenants will be choosing the right agent. There are a number of characteristics that will make someone suited for working with you.
For one, you should look for reliable real estate agents who are familiar with your area as this will help a lot in both advertising the space and finding tenants. The agent should also hopefully be experienced in working with rentals. A lot of agents don’t work in rentals very often, so it may be hard to find someone who is very experienced in the practice. However, if you can find such an agent, they will be a great fit.
Beyond just experience in rentals, it’s ideal if they have experience working with your target audience for renters. If you’re looking to rent a luxury condo, for example, it will help to have an agent who understands that market well.
Finally, you should talk to any potential agents about how much volume they can handle. For example, if they are selling a lot of homes and you only have one unit to rent, they may not be the best choice. An agent will usually choose to work on a house sale where commissions are higher over a rental, so your rental unit may not get the attention it deserves. On the other hand, if you have many multiple units to rent out, you should make sure that your agent is able to handle that volume of work and should ideally have a relatively open schedule when they take on the job. In this case, it may even benefit you to split up your rental units between two or more agents so you can have the best chances of getting tenants in a timely manner.
Conclusion
There are many reasons why a landlord may want to work with a real estate agent to find tenants for a rental. Though it may not be ideal in every situation, in some circumstances the decision to work with an agent can make all the difference and be well worth the money.
Corben joined CREW as a relative newcomer to the field of real estate and has since immersed himself and learned from the experts about everything there is to know on the topic. As a writer with CREW, Corben produces informative guides that answer the questions you need to know and reports on real estate and investment news developments across Canada. Corben lives in Guelph, Ontario with his partner and their two cats. Outside of work, he loves to cook, play music, and work on all kinds of creative projects. You can contact Corben at corben@crewmedia.ca or find him on Linkedin at https://www.linkedin.com/in/corbengrant/.
