Brokers Still Hate Rentals

This poor sap probably has no idea! New to the business, doesn't know any better, that's my guess...

Here’s a typical broker showing rentals, the poor sap. Note that his customers look absolutely thrilled (this never happens).

I covered this subject back in 2006, but it’s always fun to re-visit!

Suppose you were to shake me awake one night at 3:00 AM * and shout, “Gid! How do you feel about doing rentals?” Of course with no time to prepare my answer, I’d probably blurt out that I don’t care for them (and perhaps some other colorful words).

“But why then do you do so many, Mr. Real Estate?”, you might next ask, and the answer is, it’s kind of like ol’ Sir Edmund Hillary discussing the reason for climbing Mt. Everest: because they are there. You’re a broker, you have clients, they own properties that need tenants, what are you going to do, farm it out to an assistant?

Nope, it’s one of those “small” jobs you have to do yourself. Because letting a bad tenant into a client’s property is a disaster, they will never forgive you. And why should they? You are an expert, loads of experience, equipped with all the tools needed to check people out before they move in. There’s no excuse for blowing it.

Three things: credit report, employer verification, previous landlord. That’s it, that’s all you need. Even just two of those is usually good enough, but you have to actually do the work. Get that credit report, call the employer, talk to that last landlord! (oh ,and go ahead and google the person, too).

Doesn’t sound all that bad, so why do brokers hate this aspect of real estate? It’s the crappy pay. Pretty much the same amount of work as a sale, for 1/16th the money.

Let’s compare paychecks from a rental deal vs. a sale deal, shall we? This gets ugly…

Rents for $7,000/month, total lease amount = $84,000. Renting broker’s share is 3.75%, so that’s $3,150. You split that with your office and your “split” is 60/40, let’s say. So your big payday is 60% of $3,150 or $1,890, yippee!!

But let’s say God smiles down on you that day and your $7,000/month rental clients decide to buy something instead. They end up spending $2,000,000, how does that work out?

Sells for $2,000,000, selling broker’s share is 2.5%, that’s $50,000. After you split with office, your take is $30,000.

Yep, almost 16 times the pay for selling versus renting, get the picture?

 

* I promise you will never have the opportunity to do this.

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2 thoughts on “Brokers Still Hate Rentals

  1. Hey! You’re not suppose to remind civilians, or non-realtors, how much money you make on a sale. They’ll start barking for commission cuts. Just fall off the turnip truck?

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