by Michael Michalak
Working with landlords is a great way to supplement your sale business in the current market or add a prospecting element that you hadn’t considered. Offering a tenant finder service to property owners can be lucrative and rewarding for several reasons.
First, rentals close much quicker than sales. Unlike sales, there is no waiting for financing or inspection contingencies. A complete rental transaction can take a couple of weeks or months versus six to 12 months to close a sale. Depending on the rent amount, two or three closed rentals can equate to one sale commission.
Rent the property and demonstrate quality service and you now have a long-term client. Each time the property becomes available for rent again, the landlord will contact you to rent it. Some of my clients have multiple apartments, so there is additional opportunity to close rentals. Over the years, this has become a steady and periodic income that I can count on. When the owner decides to sell the property, you will be the first agent in mind to list it!
Third, convert tenants you have placed in a property to buyers. I have one tenant who had been receiving my monthly mailings who recently called me to purchase a condo. I qualified him through my lender and we are close to putting an offer in on a property that will probably close by the end of the year.
When working with rentals, there are several things that you should know. The most important is the landlord/tenant laws in your area. For example, Chicago has specific laws in place that govern rentals. You are liable as an agent for Fair Housing, handling of security deposits and lease provisions. The law in your area has probably changed over the years, so ensure that you are up to date. In Chicago, not providing the tenant a correct interest rate schedule could cost you two times the security deposit amount along with court costs and attorney’s fees.
Fair Housing is also an area of misunderstanding with agents and property owners. The most recent changes of familial status, handicap provisions and source of income are good examples of problem areas. Know these along with the other core areas of fair housing. Don’t get involved with property owners that feel they can do things the way that they want; it’s really not worth the commission.
Most importantly, put systems in place for your rental business. Have specific methods to prospect for tenants and landlords. Whether you use the newspaper, MLS or other sources, develop a rental marketing plan.
Outline a tenant screening process. Discuss with your clients what credit score, income and lease requirements are satisfactory for tenants. Decide whether you will be qualifying the tenant or you will be enlisting the help of a tenant screening service.
Sit down with a real estate attorney that specializes in landlord/tenant law. Have them outline what your lease document and disclosures should include. Having a competent attorney on your team will be a huge asset if you have questions or problems with a rental.
The best way to get started in the rental business is to talk to your broker and find an agent in your office that has a thriving rental business. They can mentor you on how to get started and be successful. This time of the fall and winter is the best time for prospecting for property owners. The weather, holidays and the regular lack of tenants has landlords very motivated to work with a competent agent.
Michael Michalak is a broker with RE/MAX Signature. He can be reached at [email protected]