Finding a rental can be a challenging, time-consuming process. The type of rental you are looking for determines much of what you can expect. How you go about finding that place can determine the process as well.
One little known secret many people are unaware of is that a rental real estate agent can help you in this search and make it very easy. Let’s dig into this topic now and break down some of the basics of having an agent involved in the search for a new rental.
We’ll take time to focus especially on the general cost an agent will charge.
Various Ways to Find a Rental
When most people begin to search for a new home to rent, they do it from personal initiative. In these cases, everything is dependent on them.
They keep an eye out for rental properties, they do all the call making, they schedule visits to the places they like, they meet with the landlord or property manager and sign the paperwork.
The benefit of doing it this way is that the person is fully in control. They know their schedule, their finances, their preferences and can decide what they want quickly.
The downside to this approach is that the person will be relying on personal research, energy, efforts, and financial credit.
Besides this being a draining process for many, the average person has access to only a few channels (out of the many out there) of rental listings. The person is also working solo and will rarely if ever, be able to negotiate contract terms.
Property Management Companies
Another option is using a property management company. These companies ordinarily have a large portfolio of homes or apartments which they manage.
Getting in touch with one can simplify the search. They will tell you everything you need and will help you sign the lease when that time comes.
However, much like personal initiative, nearly all of the work is dependent on the person. The company will help somewhat, but their job is to maintain properties and get the leases signed.
They represent the landowner and will not budge on the rental price, or the qualifications needed to rent that place. This is their focus, and exceptions are highly unlikely.
For example, if they have a stipulation that a renter must have a credit score of 620 and have a stable job history (both common qualification standards), then there is no wiggle room.
Rental Real Estate Agent
A Rental Real Estate Agent is the last thing many would think of using when searching for a new rental. And yet this is one of the fastest and efficient ways to find your ideal apartment, condo, or family home.
Having an agent do the work prevents you from getting burdened, gives you access to many properties unavailable to the public, and grants you the power to negotiate the lease terms through the agent.
Real estate agents do charge a commission, though. That is the downside. Let’s dig into the benefits and the drawbacks of hiring an agent so that an informed decision can be made.
Summarizing Ways to Find a Rental Property
- Personal initiative
- Using a property management company
- Using a rental real estate agent
The Benefits of Hiring a Real Estate Agent
Building a Rental Portfolio
Using a real estate agent to help in the search for a new rental comes with many benefits. One benefit is that they save you time and energy. As soon as you sign the representation agreement, the agent is looking out for you and your interests.
Their job, from that point, is to help you find a suitable home that falls within your budget, fits your preferences and accepts your work and credit history. Here is a list of the main qualifications’ landlords look for in applicants:
- Credit score
- Employment history
- Rental history
Your real estate agent gathers all of this information together. This often involves pulling a credit report, providing thirty days of payment stubs, proof of citizenship, etc.
They will use this information to begin building a rental portfolio. You will use the actual documents later when they help you sign the lease.
Pulling a credit report costs a small fee; however, sometimes the real estate agent is willing to pay this themselves if the lease is signed. Once again, they make the process easier than if you were representing yourself and doing it on personal initiative.
To build your portfolio the real estate agent gathers your personal preferences as well.
What kind of neighborhood are you looking for?
What size housing?
Where is your ideal location?
Putting these preferences together with your personal information allows them to finalize a rental portfolio.
MLS and Other Rental Listings
Real estate agents have access to properties the general public does not. One of these sources is MLS, multi-listing services. These contain lists of properties for sale.
The information and properties they see here allows them to find places which may suit your needs better, and at a lower price than what a private person could find.
There are times that the ideal place for you may not meet all of your criteria, and you may not meet theirs.
This is where a rental real estate agent will be most useful: they can negotiate the terms of a lease. One common example of this is a person with bad credit, but a good work history.
Most landlords require a 620 credit score. Anything lower is a strong indicator this person is at high risk for defaulting on their rent.
An agent can counterbalance the bad credit report with a work history analysis that shows commitment. The agent can usually get a landlord to take a risk.
Another example relates to pets. Often many landlords will not allow pets. A real estate agent can negotiate with them and, if they are not willing to allow the pets for free, the agent can often persuade the landlord to allow them for a small fee.
Once you select a few properties your agent will want to schedule a showing. They will work with your schedule and pick out some times that you both can go and view your potential home.
Often, to make the process quick and as painless as possible, they will schedule several showings in one day. This allows for a decision to be made quickly, saving you both time and energy.
Summarizing the Benefits of Hiring a Real Estate Agent:
- They will gather the documents and information needed
- They will build you a rental portfolio based on your financial situation
- They have access to more properties than the public
- They can negotiate terms of the lease
- They can show you the property and help you sign the lease
How Much Does it Cost to Hire a Rental Real Estate Agent?
Most things in life are not free. The service and value offered by a rental real estate agent are no exception. Nailing down a fee, however, is not as straightforward as it seems.
When it comes to fees there are no set standards. Rather, much of that is left to local customs and the negotiation between the real estate agent and their broker.
Asking an agent what their fee is for services is the fastest way to find out what the cost will be. If you decide to hire the agent there is a representation agreement you will sign and which notes all the fees you are paying for.
More often than not the landlord pays this fee, but there are exceptions to that rule depending on the local market. In general, agents base their commission on the first months’ rent or a percentage of the annual lease.
Commission Based on Monthly Rent
Commission norms for finding a rental run along some common lines. The most common way of deciding commission is having the first months’ rent go to the various real estate agents involved.
That means that if the first months’ rent is for $1000 then when you bring that money to the lease signing it will go directly to the real estate agent.
That may seem like a lot of money, however, the more real estate agents involved (as well as their brokers’), the less money there is in the commission. Let’s break it down a bit.
Every real estate agent has a broker who employs them. Every commission the agent makes is split with their broker.
That split varies; it’s a set split negotiated between the agent and the broker. Common splits are 60/40, 50/50, or even 80/20 (with the first amount being the agents’ commission and the second the brokers’) and the broker divides the check accordingly.
Now add in another factor: the landlord may have had a real estate listing agent. If this is the case, that check is split in half (so, $500 for our purposes) and is shared between their broker as well. The rental real estate agent could be looking at a commission of $250 from a $1,000 check.
Commission Based on Annual Lease
Commission based on the annual lease is another common pattern. Typically the landlord pays this. It is common in places of high rental competition.
The percentage charged by the real estate agent is something set by the broker. Often it can range from 3% up to 10%. That can have some big payoffs if the annual lease is a big one.
For example, if the renter signs a one-year lease agreement for $30,000 then the agent, if they charge a 10% commission fee, would get $3,000.
This breaks down further between the various parties involved, but it’s still a hefty income!
Summarizing How Much it Costs to Hire a Rental Real Estate Agent:
- Ordinarily, the agent gets commission from the landlord
- In most cases, the commission is the first months’ rent
- In places where the rental property market is highly competitive, the commission is a percentage of the annual lease
Signing the Lease
Once you receive approval to rent you will meet with the agent to sign the lease. Ordinarily, the first months’ rent, as well as a down payment, are due upon signing, if not before.
The agent will take the funds, deposit them in an escrow account, and the disbursement will be made within the next few days by their broker.
Once you complete the signing there are many happy people. The landlord, because they have a new tenant. The rental real estate agent, because they have their commission secured. Yourself, because you have a new home.