One Great Way to Recession-Proof Your Business

Rentals are the perfect way to recession-proof your real estate business. And if you are reading this article, it means you are open to a new way of thinking and to a great opportunity because when approaching the average real estate agent about rentals, the first thing you may hear is “I don’t do rentals.” But now is a good time to acknowledge the new reality and create opportunities to supplement your income while working within this current market. We don’t know exactly how long it will last, so why wait?

Many real estate agents in past uncertainty were forward-thinking and rode out the storms by supplementing their income with rentals. As a result, they were super successful. Plus, there are many great benefits that go along with working with rentals.

Here are some of the PRO’S and CHALLENGES:

HUGE PRO #1:

You meet a lot of interesting people who turn out to be incredible sources of knowledge and business for a lifetime– from homeowners to investors.

Plus, you meet great people who have relocated to your market for new jobs and prefer to rent first before buying. Moreover, these are some of the types of potential clients you can get to know and work with to find them the perfect property for their needs. When you setup a follow-up program, stay in communication, and provide value, many of these tenants will move forward and purchase a property with you.

PRO #2:

Supplementing your income with rentals can be the cushion you need to consistently assure all your base expenses are met each month. Plus, they get you through any rough times.

PRO #3:

While working with buyers may take months to find them their ideal place, renters usually need a property right-away. Typical closing for a rental is 30 days or less. Plus, you can narrow down the perfect properties to show them in a matter of days. Many tenants have rented their home, apartment or condo without even coming to see it in person because they were provided with precise photos and videos of their future home and community. If they are out of state, you can provide them additional great value when you can go in person to see the potential rental property. This is good when they have finalized their selection, so you can answer any questions they may have before they submit their application.

PRO #4:

You have the opportunity to build valuable connections with local real estate Investors. Top agents have grown into great allies of investors by finding them future properties for investment, by keeping their portfolio full of tenants, and by selling their properties when they are ready to move on.

PRO #5:

Many real estate agents get into the business to build passive income. What better way to do it than to build a nest egg of income-producing properties? You have an opportunity to learn by getting to know the ins and outs of the different types of rental properties in your market. Then when an opportunity comes up that matches your criteria, you can purchase one property that can lead to many properties in the future. It all starts with your first one!

CHALLENGE:

You must be a Master of Communication and excel at pre-qualifying your clients BEFORE you work with them. Otherwise, the amount of time spent vs. investment can be too much.

Always have your potential clients complete an application via one of the online rental platforms. This way they can feel comfortable that their social security number and personal information are protected. The typical online screening platform prior to you finding them a place to rent is between $30- $50 USD. Then when you find them a place, they will still have to pay the screening fees required by the rental complex or housing association that is in place.

Now let’s turn this con into a pro. When you work with a potential tenant and you know his or her credit score beforehand, prior rental history or homeownership, job history, current income and assets, this puts you and them in a position of strength.

Beware of the tenants that tell you their credit is great, as well as their income, and there should be no problem. That may be true. Yet, there are so many factors involved depending on the requirements of the association that it is best to have everything in place and provided ahead of time.

As the demand for rentals increases, landlords will have their pick at potential tenants. When you have all your ducks in a row and present the information to the landlord’s agent quickly, you have the best shot at your tenant being chosen.

Properties that are well located in high-demand areas rent quickly. When you are armed with information and can communicate the benefits of this tenant or tenants to the potential landlord, it creates a win-win for all parties involved.

Many homeowners will choose to rent their home if they do not get the price they want, so this is a great opportunity to help your seller find a great tenant until she or he is ready to sell again.

Example of  Income Opportunity Missed

An agent had an owner who was not ready to sell and needed a new tenant. (This was right before the onset of COVID-19.) This particular luxury building required that the listing agent be there to show the unit, which can be highly time-consuming unless you live in the community or nearby. Multiple calls to nearby real estate agents to share in the commission resulted in “No, can’t help you.” The rental per month for this unit was $4,000. So you can figure out what your potential split would be. On top of that, the second person to see the unit on the first day it hit the market said, “Done, I want this unit” and asked her Realtor to write up an offer.

Can You Afford to Throw Away Potential Income Right Now…or Ever?

If not, open yourself up to the opportunity that rentals can bring you. And talk to those in your network that have had huge success doing it to gain some insight and tools to get started. You have everything to gain!

Furthermore, when processing your contracts, you can use a digital real estate transaction management software to help you. Check out Form Simplicity, which is an excellent choice because it is owned and operated by a Realtor association, which supports you in the real estate industry.

Written for Form Simplicity by Janice Zaltman, a Realtor, LEED AP, Marketing Coach and Writer with more than 20 years of experience in the sales, marketing and media fields.