I am new to real estate and looking to get started in rentals as it seems like a good place for beginners to get their feet wet. I have two options when it comes to brokerages as far as rentals.
One is in West New York, NJ. They provide all the listings, you just have to show the apartments. 50/50 commission on rentals where the broker got the listing and and 85/15 on ones where you get the listing. West New York is about a 50 minute drive for me. This seems all good but my concern is that since these are open listings there could be other agents showing the same properties. Not that anything is ever going to be easy, but just because the broker gets the listing doesn’t mean it will be as easy as it may appear.
Another one is in Summit NJ. This one is closer and the earning potential is a little more clear. The broker makes it sound as if doing 2 rentals per week is somethting that can happen at some point in the future. They train you on calling landlords and provide a lot of the leads. The concern I have with this one is that they charge errors and omissions insurance which is over 200/month but they said they make it 100 with the rest drawn from commissions.
I’m having a tough time deciding between the two options. Any help would be appreciated.
Rentals aren't really worth it in most places.
Tenants can take just as long to make a decision as people buying a house. It sounds like easy money, but it's not. If they are qualified and you can get them approved within a day or two, then it's okay.
This is how commissions work on rents:
$1,600 for a 1 bedroom as an example. Listing broker splits that with the tenant's broker. So, your office would get $800. Office takes 30%, plus 6% to the company (depends on your company split). That leaves you with $512. You have to pay taxes, so just say you're left with $358 (30% tax bracket). Your office charges $70 per month tech fee. $90 to rent a desk at the office. Plus your board of realtors dues. Gas and tolls.
So, in low rent areas outside of urban high rent areas, rents aren't worth the effort. Especially if you have to cover a large area to show apartments.
It takes the same amount of effort to show a house as it does an apartment...
Skip the rentals. Spend your time doing sales.
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I do a fair amount of rentals here in NJ for my investor clients, listing them for rent. They can be quite time consuming as most renters really just want to understand the space and see if it will work for their needs. I've moved toward 3D scanning each place (with a Matterport camera) so that if I do get a request for someone to see the unit, I'll send them the scan first so they can do the virtual walk through. If they like what they see from that they're usually more serious about renting it and the process can move much faster making rentals worth my time.
Renters can turn into buyers. Many come to a market first to rent and see then about putting down permanent roots. Just a warning though rentals fall apart much easier than sales. People can easily walk away at the very last second and go onto something else. Still, depending upon your market rentals can be worth your while and a good way to expand your real estate business. I don't know if i'd be trying to do them full time though @Glenn Gayet . I think a good mix of sales and rentals can turn into a good business for you.
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