From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1525 topics, 14456 posts — Last Post 04/24/14, 05:44AM

BiggerPockets Exclusive PRO Area

117 topics, 841 posts — Last Post 04/23/14, 08:28AM

New Member Introductions

10986 topics, 86570 posts — Last Post 04/24/14, 05:32AM

Real Estate Success Stories

399 topics, 6213 posts — Last Post 04/24/14, 01:08AM

General Real Estate

General Real Estate

Buying & Selling Real Estate

5993 topics, 47218 posts — Last Post 04/24/14, 05:24AM

Renters

650 topics, 5861 posts — Last Post 04/23/14, 07:39PM

Get Foreclosure Help - Help Stop Foreclosure Forum

317 topics, 2561 posts — Last Post 04/23/14, 08:28PM

Home Owner Association (HOA) Issues & Problems Forum

238 topics, 1611 posts — Last Post 04/23/14, 04:02AM

Do it Yourself

658 topics, 6316 posts — Last Post 04/23/14, 09:50AM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3709 topics, 29747 posts — Last Post 04/24/14, 05:07AM

Real Estate Guru, Book & Course Reviews and Discussions

1139 topics, 11600 posts — Last Post 04/24/14, 04:53AM

Ask About A Real Estate Company

743 topics, 7344 posts — Last Post 04/22/14, 11:25PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5637 topics, 43962 posts — Last Post 04/24/14, 05:22AM

Rehabbing and House Flipping

3353 topics, 31105 posts — Last Post 04/24/14, 05:49AM

Real Estate Development & New Home Construction

554 topics, 4694 posts — Last Post 04/22/14, 09:17PM

Innovative Strategies

705 topics, 6044 posts — Last Post 04/22/14, 04:06PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

867 topics, 6693 posts — Last Post 04/24/14, 03:16AM

Rent to Own a.k.a. Lease Purchase, Lease Options

699 topics, 4942 posts — Last Post 04/24/14, 05:49AM

1031 Exchanges

143 topics, 1062 posts — Last Post 04/22/14, 03:21PM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1691 topics, 11313 posts — Last Post 04/22/14, 09:26PM

HUD, VA, and Tax Sales

416 topics, 3103 posts — Last Post 04/23/14, 02:29PM

REOs

1217 topics, 10603 posts — Last Post 04/23/14, 08:46PM

Short Sales

1539 topics, 13154 posts — Last Post 04/23/14, 08:25PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7252 topics, 71192 posts — Last Post 04/24/14, 05:46AM

Mobile Homes & Mobile Home Park Investing

639 topics, 5146 posts — Last Post 04/24/14, 05:13AM

Investor Basics

Starting Out

7733 topics, 60690 posts — Last Post 04/24/14, 05:41AM

Investor Psychology

431 topics, 6107 posts — Last Post 04/20/14, 06:04AM

General Real Estate Investing

4730 topics, 37326 posts — Last Post 04/24/14, 02:18AM

Real Estate Investor Marketing

1738 topics, 14148 posts — Last Post 04/23/14, 08:20PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1413 topics, 9013 posts — Last Post 04/24/14, 12:59AM

Multi-Family and Apartment Investing

1123 topics, 9396 posts — Last Post 04/24/14, 05:24AM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

645 topics, 4913 posts — Last Post 04/24/14, 05:42AM

Business Basics

Goals, Business Plans & Entities

833 topics, 7585 posts — Last Post 04/23/14, 08:58PM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2802 topics, 20136 posts — Last Post 04/23/14, 06:57PM

Property Insurance

311 topics, 2057 posts — Last Post 04/23/14, 01:20PM

Personal Finance Discussion

330 topics, 2754 posts — Last Post 04/22/14, 12:06PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2852 topics, 19848 posts — Last Post 04/24/14, 02:50AM

Creative Real Estate Financing

1221 topics, 8860 posts — Last Post 04/24/14, 02:09AM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1216 topics, 8025 posts — Last Post 04/24/14, 05:37AM

Bankers, Lenders, and Mortgage Brokers

442 topics, 1931 posts — Last Post 04/23/14, 09:04PM

Contractors

269 topics, 1690 posts — Last Post 04/22/14, 07:33AM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

2017 topics, 11758 posts — Last Post 04/23/14, 10:03PM

Americans & International Real Estate

162 topics, 572 posts — Last Post 04/24/14, 03:31AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

65 topics, 439 posts — Last Post 04/22/14, 09:27AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15085 topics, 54135 posts — Last Post 04/24/14, 04:15AM

Real Estate Events and Happenings

168 topics, 2606 posts — Last Post 04/23/14, 10:05PM

Off-Topic

Off Topic

Off-Topic

2907 topics, 32445 posts — Last Post 04/24/14, 05:30AM

Housing News & Real Estate Market

920 topics, 8391 posts — Last Post 04/23/14, 02:43PM

BiggerPockets Real Estate Investing Summit

97 topics, 1752 posts — Last Post 04/23/14, 04:51AM

BiggerPockets Resources

Forums » Landlord & Rental Property Questions » Is Using A RE Agent For Rentals The Smart Thing To Do If Concerned With NOI?

Is Using A RE Agent For Rentals The Smart Thing To Do If Concerned With NOI?

19 posts by 16 users

Signup

Real Estate Investor · Naples, Florida


I just purchased 3 rental properties. Due to time constraints, etc I decided to use an agent to bring qualified tenants. I felt they have the ability to better screen tenants. They cut a deal with me for 1/2 the first months rent. After that, it is my responsibility to collect rents and manage the properties. I didn't think this was a bad trade-off because I know that if I get one REALLY BAD tenant that person could destroy hopes of any profit for a year or longer. I think I am doing the right thing. What do the BP group think??

John



Wholesaler · Baltimore, Maryland


There is nothing wrong with what you are doing. In my are there are tenant placement people who are not full service property managers. All they do is find and screen tenants.

However keep in mind just because someone is a professional doesn't mean they do a good job. Some tenant placement people do not screen tenants well. So assuming you won't get a bad tenant is probably a bad assumption until you have a track record with a particular agent.


Small_crab1_copyNed Carey, Crab Properties LLC
Website: http://baltimorerealestateinvestingblog.com/
http://baltimorerealestateinvestingblog.com/


Real Estate Investor · Naples, Florida


hmmmm...I can't say I considered that. I do know they run an eviction screening and a police record screening of some sort. I will try and get a thorough answer as to exactly what they do.

The agent that I use just brought a tenant to one property that is a law enforcement officer. I was happy to see that...knowing that I was not going to be dealing with someone that just got out of prison for murder...especially murdering a landlord! I just learned something new with this tenant: you cannot deny a service dog. They are a K9 unit...and you cannot deny rental to a K9. They might have more rights than a human being.

Thanks for the input...
John



Real Estate Investor · Gibsonia, Pennsylvania


I am not expert. But that is how I do my rentals. Lucky so far. One bad apple but we worked it out. No money lost.
1 month rent and I do the rest.



Real Estate Investor · Naples, Florida


I found most agents in SW FL want to charge one month. When I promised them more properties they cut it to 1/2 the first month. I am a long term relationship believer. They know they wil get all of my business...and I know (or believe) that they will do a thorough job.

I hear a lot of people manage their own properties and wonder how they screen tenants on their own. My time is extremely limited so I felt paying 1/2 the first month rent was very reasonable. I have not run numbers to see the effect this has on my NOI. I am a beginnning investor and not what I would call "sophisticated".....but rather "seat of the pants". Six months ago I didn't have any plans of having rent houses. That happened quite by mistake. After I ended up with number 1, then I felt I could not make a lot of money with only 1, so now I am at number 3 and working on 4. I have a hard money lender giving me a helping hand. I expect to buy and read a few books including a couple that have been written by mods on this site.

When I have some spare time I might sit down and calculate what the effect of forfeiting 1/2 the first months rent is. The one factor that cannot be calculated would be the effect of renting it on my own without having the ability to do thorough background checks, and the possible results of getting a nightmare from hell tenant! I have seen the effects of that and it was NOT a pretty sight! I didn't feel 1/2 the first month was a lot of money, and most agents that I talked to charged the entire first month.

John



· Hatboro, Pennsylvania


You got yourself a bargain! I have used three different agents in both Pa. and Fl. and all charged me one full months rent. When they find you a prospective tenant, you are able to run additional background checks yourself to verify they meet your standards.
When I get to the point of doing this full time, I will no longer use an agent, but for now, it is worth the money to make sure I get enough tenants that I can be picky. Bad tenant=nightmare.



Real Estate Broker · Pensacola, Florida


As the owner of a sizable property management operation, we charge 1 month's rent for this service. People doing it for half of that are really cutting themselves. If you're happy with the results of the 1/2 price folks, keep them around. If you have a bad experience, switch to a full fee professional organization.

Unfortunately for the public, the "cheapest" property manager is almost always the "most costly." IMO:)



Real Estate Investor · memphis, Tennessee


Originally posted by @Ned Carey:

However keep in mind just because someone is a professional doesn't mean they do a good job. Some tenant placement people do not screen tenants well. So assuming you won't get a bad tenant is probably a bad assumption until you have a track record with a particular agent.

I think that is really good insight Ned. You really have to dig into a companies operation to know if they are any good or not.

@John Thedford, the cost doesn't really concern me and I don't think it is an indication of their success at placing tenants. For me, there is only one way to do something right and if they can get it done for 1/2 a months rent as opposed to a full month's rent, more power to you. But, only time will tell how it works out and if you decide to move to a property management company that handles everything. Good luck with it and hopefully they perform for you.

Chris


Small_new_mi_logoChris Clothier, Memphis Invest, GP
Telephone: 901-212-9647
Website: http://www.memphisinvest.com
www.MemphisInvest.com 1(877)-773-9998 Chris D Clothier


Real Estate Investor · Audubon, Pennsylvania


My take on it is you might be having higher expectations of an agent than I do.

That agent is going to be paid the same for evaluating 5 tenant candidates as for evaluating 50 tenant candidates. Do you expect that the compensation will induce the agent to undergo far more effort to identify a qualified tenant, or do you expect that minimal effort will be put into it? I expect the latter, since most people are inclined to put in the least effort that they can possibly get away with.

So I will give you a true anecdote here. Last year, I was in HD purchasing some bulk door stoppers, since I put them at every door in a rental unit to minimize doorknob damage to walls. The guy working in HD in that aisle commented that I seemed to be buying lots of the door stoppers, and did I have some big project. I explained that I was getting a rental ready, and any leftovers would be used on the next one. He said he was getting rid of his rentals. I asked why. He said he was tired of crappy tenants not paying and wrecking the place on the way out. I said that the location of his rental was one where better quality tenants could be found, and that he should screen the tenants better upfront. He said he used an agent to place tenants in his rentals. I told him the same sort of comments I made at the beginning two paragraphs of my post here ...

So that is why, although it may be hard at times, I have chosen to handle the tenant selection myself (at least for now). That is one of the most important tasks in the rental business IMO; much of everything else can be outsourced with less trouble (like repairs for example).

Lastly, if you use an agent, often they will just use the "standard agent lease form" for the state you are in. These "standard agent" forms aren't set up to protect the landlord; they are set up to protect agents IMO.

Several strikes against using an agent there. Now, if your location is quite a distance, then you're probably going to need the services of an agent, but otherwise ...


Steve Babiak, Redeeming Properties, LLC
Telephone: 6109082183
...


Real Estate Investor · Michigan


@John Thedford In my area, the first months rent is the normal compensation for placing a tenant. I'm not sure if your agent is keeping the entire half month, or paying some out to another agent that brings a tenant. Either way, you might be walking over dollars to pick up dimes.

I have a one man real estate brokerage that I use for doing my own business. When I have a vacant rental, I list it through my company and pay a half month to an agent that brings someone. (I save the other half since I am the listing agent). What I do is have the other agents show the house and have their prospect fill out MY APPLICATION and bring it to me with the application fee. I can then check them out and it's my decision if I rent to them or not. I rent out most of the houses myself, but I feel it's a bargain to have others show my properties in exchange for a tiny commission. It saves me a lot of time and I get MLS exposure.

Like @Steve Babiak said, they want to rent it as soon as possible and could take someone that might not meet your standards. I would suggest offering a full month, but YOU decide if someone is approved or not.

If you keep doing it the way you are, I would make sure that YOU have the final say on who is approved and not your agent. You could take recomendations, but still have the final say.



Real Estate Investor · Garland, Texas


I've used agents 3 times to place place tenants. 2 out of the 3 broke their lease before the first year was up, and I almost filed eviction on the 3rd, but they cured just in time. I want to do my own screening, not to pay for it and then do it again anyway.


Jon Klaus, SellPropertyFast
E-Mail: [email protected]
Telephone: 214-929-6545
Website: http://www.facebook.com/Buttermilks


· Denver, Colorado


My agent has been pretty good, but I have limited data: only been in the business of renting out properties for a little over a year and vacancies are really low around here.

Having said that, the first property they 'marketed' and signed the tenant for 1/2 months rent. I manage the property. For the next two, they sourced the tenant and are also managing the property. We have one more that we are just finishing rehabbing, and likely I will have the source and manage. My time is pretty limited, so I a happy to have them manage. Plus my cash flow margins are pretty good, so I am still cash flowing.



Real Estate Investor · Fukuoka, Queensland


Simple calculation - average rental period for the area and "good tenant" profile (in our case, for instance, in Japan, its 4-5 years in the singles' units we like most), take 25% off that time for unexpected downturns (or more if your area is notoriously unstable), and work out the percentage 1/2 or 1 month rent income is of that period (in our case more like 1-2 months).

I think, in the vast majority of cases, and particularly if you work out how many empty months bad screening or management can cost you, you'll see there's no doubt as to the financial gain potential a good PM or tenant placer can be worth.

And that's without even taking into account the personal toll of time and resources spent when you do it all yourself...



Real Estate Investor · Naples, Florida


What I have working against me it distance. My properties are 40 miles from where I live. After driving there a few times to show the properties and not getting a tenant application, I realized a good agent could probably get the job done. She brought a tenant for one house within the first week. Another sits vacant.

So far, I have a very high opinion of her and her firm. She is the owner/broker. She strikes me as very thorough. I do believe she has the ability to screen tenants better than I do. I don't have access to credit records, eviction records, etc and I do know they run those. She uses my lease which I am quite happy about. If things don't work out I will post that, but so far so good. From what everyone says, 1/2 the first months rent it a truly good deal if she does a good job screening them. I intend to find out more next week. Thanks to everyone for their insight. I am new to RE investing, and no doubt will learn some lessons along the way.

John Thedford




Owners have called us frequently about offering this hybrid service. Our screening is rigorous and so far, owners have been satisfied the handful of times we've done it.

Very interested in some other opinions too. Anyone else chime in?



Real Estate Investor · Michigan


Hi,
We've got the same deal available here- they find a tenant for 1/2 month's rent, sounds very fair to me. Then again, for 8% gross rents they'll manage the whole year, so that's about 1 month's rent for less headaches... I haven't done either yet, but I am new to this and the property we bought has tenants already.

Kelly



· Chandler, Arizona


Normally we will have our real estate agent list our property on MLS for rent. She will do it for free if we bought the property through her. We will then pay a $300 dollar commission to the agent representing the tenants (properties rent for 1200/month +). For the screening we do that ourselves. We email the application and do the credit/background check online. Any follow up is through email/phone calls. The screening part is easy.

If we accept the tenant then they will have to sign the lease to get the keys. That is the first time we meet and it is normally at the property. This keeps our time minimal.



Commercial Real Estate Broker · Scottsdale, Arizona


Yes, I agree that using an agent is fine and all but I'd do the screening end yourself. The agent won't have as much skin in the game if you will as you do as the property owner. What does he/she care of the tenant gets evicted in six months, he already got half the first month? Utilize a RE agent if you must but make sure the tenant is compliant with YOUR screening criteria. Heck you could even let a RE agent know what your rental criteria are before they even bring you someone. I'm a landlord and in the tenant screening business myself so trust me it's something you want to keep an eye on. Evictions are a nightmare, so is trying to collect bad debt.



SFR Investor · Wheat Ridge, Colorado


Around here they typically charge half a months rent plus 10% of collected rents. With no actual vacancy and one turn over a year, that works out to 14% of your gross. If you're paying 10% a month plus a full months rent that's 18% of gross!

I show properties once a week. That's it. I tell all callers the same time, usually on a Saturday or Sunday. Once in a while, I actually have more than one group at a time, but its rare. Its not a bad thing when it does happen, they get a little competitive. I tell them to call me 30 minutes before the showing or I won't be there. I usually try to get at least four who say they will be there, which usually translates into two or three actually showing up.

I've used an agent once. The resulting tenant wasn't my worst, but was certainly not my best.

This is the number one reason why I don't own properties that are two far away to manage myself. I've been contemplating @John Thedford's area for a rent-now, live-in-later property. Now my old jitters are returning.


Jon Holdman, Flying Phoenix LLC




Sign up