In the competitive world of real estate, where countless sources offer strategies to help agents generate more leads and drive business growth, a simple but often overlooked method stands out: rental properties.
According to the U.S. Census Bureau’s most recent Rental Housing Finance Survey, there are approximately 18.8 million rental properties in the country with four or fewer units. And according to Michael Lucarelli, CEO and co-founder of rental software provider RentSpree, about 50% of them are managed by small-scale landlords. Many of these landlords rely on real estate agents to assist with their rental properties.
“RentSpree does not work with large institutional investors at all,” Lucarelli said. “We are geared toward the small mom-and-pop landlords that represent around 50% of all rental units. Many of these use agents to help with their rentals.”
Since its launch in 2016, RentSpree has served 1.1 million rental units across the country, according to Lucarelli.
Miami-based Realtor Yansey Valdes entered the real estate industry in 2010 and found success by focusing on rentals. Starting with no network or clear strategy for generating income, Valdes joined Rent 1 Sale 1 Realty in Fort Lauderdale, where he immediately began working on rentals.
Within his first year, Valdes closed an average of three leases per month and earned about $70,000, well above the industry average for new Realtors.
In January 2023, Valdes established his own brokerage, Reside Realty, where he continues to assist clients with listings of both sales and rentals. With a team of five agents, Reside Realty now closes roughly 10 leases per month, generating about $100,000 in annual revenue for the brokerage. Valdes attributes much of his success to his focus on rentals and is now passing on his expertise to new agents.
“Rentals are good because they get you working immediately,” Valdes said. “The need is there all the time, regardless of the economic circumstances. There are always people who need to rent. From there, you start talking to people and building sales skills.
“Closing a lease is similar to selling a house, on a smaller scale. You need to talk to the client, do a consultation, find what they’re looking for, show them what they’re looking for, sell them on the property, write up the offer, get the offer accepted, close the deal.”
Making money
Compensation practices vary greatly across the U.S., but it is common for the agent representing the landlord to charge 5% to 6% of a unit’s yearly rent price as a fee. The commission can also be split with a renter’s agent, if they have one.
Alternatively, if the rent is on the lower side, the tenant’s agent might only get a flat fee instead of a split. Regardless, even in markets where they only get a referral fee, Valdes still encourages agents to jump into the business.
“Even in those markets, I still tell agents, ’The pay might be low, but it’s good for you because you start talking to people and meeting people, which is always beneficial, instead of you just waiting around.’”
Lucarelli highlighted two reasons why agents might want to focus on rentals. First, agents can earn a commission from rental transactions, albeit less than those from sales. Second, by working with renters and landlords, agents can build a sphere of influence. When these renters and landlords eventually become buyers and sellers, he said, they are more likely to turn to the agent they worked with previously.
“I used to work as a Realtor,” Lucarelli said. “And I observed that the most successful agents in my office were doing a lot of rental transactions. And it was kind of the dirty secret that they had because they never talked about it, they received no support from their broker, and they didn’t have any tools or information on how to handle those rentals.”
Market realities
As of January 2022, the median home sale price in the U.S. ($433,100) was nearly six times higher than the median household income ($74,580), according to a report by Visual Capitalist based on Federal Reserve data.
As a result of these economic realities, renting remains the popular and practical choice among a large segment of Americans. The median age of a first-time homebuyer is 36, according to the National Association of Realtors.
Real estate agents can provide significant added value to landlords and tenants alike. For renters, agents can offer a streamlined and guided process that ensures a smoother home search experience. In an era where online listings may be outdated or inaccurate, agents can also provide up-to-date information and potentially uncover off-market opportunities.
Moreover, agents can assist renters with paperwork and help them avoid scams, providing a layer of security and expertise. For landlords, agents streamline the tenant discovery process, saving time and effort.
Rental properties remain in high demand among households that either prefer renting or cannot otherwise attain homeownership.
February 2024 data from CoreLogic showed that rents for single-family properties rose by 3.4% year over year, the fastest pace of growth in 10 months. Rent growth in New York City doubled that pace at 6.9%, with Seattle (+6.8%) and Boston (+6.4%) not far behind.
Major markets such as Honolulu, San Diego, San Francisco, Detroit and Houston also outpaced the U.S. average growth rate during that period. Conversely, prices in Miami (-3.1%) and Austin (-1.3%) recorded year-over-year declines.
CoreLogic posited that these trends “could again signal that Americans are slowly migrating back to larger, more expensive coastal metros.“ In contrast, less expensive metro areas such as St. Louis, Charlotte and Orlando led the country in rent growth in February 2023.
Client accommodations
To Gary Malin, chief operating officer of Corcoran, it is important for real estate agents to be able to accommodate the needs of their clients.
“We are in the hospitality business, right?” Malin said. “We’re not in the residential real estate business, the sales business. This might be the vehicle of how people make money, but we’re in the hospitality business. And if you want to be valuable to your clients in the short and long run, it’s important to be well-versed in the marketplace.
“And it’s important to be able to help your clients with every need they might have. Just because someone has a sales plan today doesn’t mean they won’t be a rental client tomorrow. Therefore, I think it’s very important to be attuned to the overall marketplace.”
Anthony DelleCave, who has focused on rentals throughout his real estate career, now runs a highly successful team with Corcoran in New York City that closes more than 500 leases each year. DelleCave attributes his success to building strong relationships within the rental community.
“I always stayed in my lane, the rental business, and grew with this business,” Dellecave said. “From this activity, I built a lot of relationships within the rental community, with landlords, brokers, management companies, superintendents and everything that fueled the rental business in New York City.
“The sales business just evolved on its own. It’s similar to planting seeds. We would plant rental seeds all over the garden and then wait for them to bloom. And as they would bloom, they would either bloom into more rentals or eventually turn into a sale. So, I never focused on sales; I never really did any sales campaigns or anything of that nature. My sales business was strictly built upon my rental business.”
