BAM’s Key Details:
- RentSpree, the industry’s premier rental management software provider, teamed up with RealTrends to study the prevailing mindset around the profitability of rental properties
- The 2022 RentSpree + RealTrends Rental Power Rankings study showed about 50% of agents decline to work with rentals because of the comparatively low ROI
- RentSpree offers tips to help agents grow their expertise with rentals to maximize their profitability in the changing market
Rental properties and investment offer real estate agents a unique opportunity in today’s challenging market.
At a time when more buyers and sellers are backing away from the market—thanks to high mortgage rates and persistently high home prices—expanding your expertise to include rental properties makes sense, especially if you are working on building your sphere.
One of Redfin’s housing market predictions for 2023 is an increase in would-be homeowners deciding to rent, largely due to the high cost of buying a home.
About 50% of agents decline to work with rentals because the ROI is considerably less than they’re accustomed to earning with for-sale properties—and, in many cases, too low to justify the time and effort involved. And about 43% decline because rentals are not their area of expertise.
RentSpree wants to change that perception by highlighting how rentals can improve an agent’s profitability year-round, especially in an uncertain economy.
A professional familiarity with rentals, rental property owners, and tenants can enrich your understanding of that housing segment and lead to massive returns down the road.
So, what can agents and brokerages do to capitalize on the growing rental market?
Stop treating the growing rental market as a distraction
The current housing market is slowed by affordability challenges for buyers and the lock-in effect for sellers. Forward-thinking brokerages are taking steps to build new relationships and leverage existing ones across a more diverse customer base, while other brokerages are shrinking or holding back.
Sticking to “what you know” is a comfortable choice. But there won’t be as many transactions to go around this year, and the rental industry isn’t going away—or even shrinking. Housing experts expect the number of renters to grow in 2023.
So, it only makes sense for you to learn how to help them. Why?
- Tenants can become repeat clients. The tenants you work with know are likely planning on buying a home one day. And if they already know and trust you as the agent who helped them find a place to live when renting was their only option, they’re more likely to seek you out for help in finding a home to buy—especially if you keep in touch.
- It sets you up for investment deals. The more agents know about what’s involved in rental property ownership, the better equipped they’ll be as investors to find the best rental properties to buy—and the best tenants to occupy them.
Take a hint from home builders in today’s market; they’re pivoting toward multi-family housing construction to meet the growing demand.
What could you do to make your business part of that pipeline?
Top agent tips for staying ahead of the economic forecast
To address the misconceptions of the rental industry, RentSpree offers the following tips to help agents maximize their ROI and stay ahead of the economic forecast.
#1: Leverage the right resources
Increasing your knowledge of the rental industry and leveraging key resources can increase your cash flow as you assist tenants, landlords, and property management companies.
Depending on your goals, you can work with buyers and sellers when the housing market is hot and with renters when the market is slower. In the rental industry, whatever the market is doing, there’s always someone you can help.
Just as with for-sale homes, knowing the landscape and where to find the data you and your clients need is critical to your success—and to your clients’ long-term satisfaction.
Right now, with many would-be buyers still renting, rents are likely to increase along with demand, even as builders switch their focus to multi-family rental construction to meet it. If you know where to look and whom to call, you can establish yourself as the top agent or brokerage for three different parties:
- Builders—helping them attract buyers for those new rental properties
- Buyers/Investors—helping them shop for properties and find qualified tenants for them
- Renters—helping them find the best places in the area (for them) to rent
#2: Consider expanding your current business structure
Your current business structure might already lend itself to an expansion of services for the rental industry. If you already work with real estate investors to buy and sell rental properties, you could also offer to fill those properties with qualified tenants once they’re move-in ready.
The natural next step, if you’re looking for ways to add income to your business, is establishing yourself as the go-to agent (or brokerage) for buying, selling, and renting out properties in your area.
Why stop at investing or helping investors buy and sell properties when you know the impact of unqualified tenants on investor ROI? As an agent, you know this business is a long game. You want your clients to be able to say, years from now, that the agent who helped them find their rental properties also saved you tens of thousands of dollars a year by helping you find qualified and responsible tenants for those properties.
Meanwhile, you’ll also be making a name for yourself as the agent or brokerage that helps renters find the best places to live while renting is their only—or chosen—option. Those renters will then talk about the agent who saved them months of searching and thousands of dollars a year in rental costs.
That’s money they can put toward rent or other household expenses—or save toward an eventual down payment on a house.
While you’re at it, you can also provide helpful tips and resources that can save these renters money and stress with the move.
#3: Lean into PropTech
As an agent, you can use property technology (PropTech) to streamline working with rentals, giving you more time to work the field rather than spending time behind a desk handling paperwork for a transaction’s front or back end.
The right PropTech solutions also enable agents to do the following:
- Set up a listing cart through the MLS to show rental properties to tenants and help renters fill out online applications
- Facilitate payment of the tenant screening fee
- Forward the paperwork to the property owner/manager once completed
- Notify potential renters of a landlord’s decision on their application within 24-48 hours (cutting two to five days from the typical manual application process)
Leveraging the right PropTech will increase the efficiency of each rental property transaction, boosting your hourly earnings and your total ROI.
Other benefits for agents working with rentals
Gaining experience related to rental properties has obvious benefits for agents intent on becoming investors themselves.
Aside from that, expanding your services to serve the rental industry increases your access to renters, helping you build trust with them—now, as renters, and in the future (hopefully), as homebuyers.
It’s not wrong to want something better for your clients than a lifetime of renting. And it’s not rent-shaming to point out the benefits of owning a home. Given the chance, most renters would rather own a home than continue renting one.
Until that chance comes—maybe with lower mortgage rates, maybe with a bump in salary, or maybe with some repair work on their credit rating—renters can still benefit from caring professionals who can help them find a suitable home in less time and for less money.
RentSpree + RealTrends Rental Power Rankings
The 2022 RentSpree + RealTrends Rental Power Rankings is now live, showcasing the top residential real estate brokerage firms by rental transactions.
The ranking program—the first by RealTrends for this segment of the housing market—features two categories to spotlight firms that assist both rental property owners and tenants.
So, if you’re not sure where to begin to learn more about serving the rental industry as a real estate agent, consider contacting the top brokerages in these lists to see what they’re doing, why and when they got into the rental market, and what tools and resources they recommend.
What have you got to lose?