So you’re a landlord with a good amount of vacant units and you’re faced with a tough decision, how do I fill them? You have a few options: place an ad online, contact your current tenants and see if they have any friends looking for a place, or… hire a broker or leasing agent to find a renter for you. Under the right circumstances, brokers or leasing agents can be a great option. Under the wrong circumstances, however, they can become a costly financial mistake. Let’s see what we need to know before we decide to invest in either.
Brokers’ and Leasing Agents’ Qualifications
There are two types of people a landlord can hire to find a proper tenant to occupy a vacancy: a leasing agent or a broker. Both are required by law, across the country, to work in your best interest. That being said, the specific laws, regulations, and requirements for each of these leasing professionals vary from state to state (and before moving forward with anyone, you should research the statutes in your area). In general, however, leasing agents take a course (around 15 hours) and then have to pass the state agent level licensing exam. They only have the authority to lease residential properties. That’s it.
In comparison, brokers take a more extensive course (90 hours) and are also required to pass a state broker licensing exam. Some states require prospected brokers to work as a real estate sales agent between one to four years before they can apply for licensure. After they complete the requirements and pass, they are authorized to assist in the buying, selling, or leasing of residential, commercial, and industrial properties. As you might infer, brokers charge quite a bit more due to the higher level of qualifications and authority they possess. You’re also paying for their market knowledge, skills in negotiation, and most importantly, access to privileged information you can’t find on the web. To summarize, leasing agents are capable of doing what you need, but brokers go above and beyond.
How Much is it Going to Cost to Fill my Property?
Don’t forget – all rates are negotiable. It’s hard to find two leasing professionals that charge the same rate, and that goes doubly when comparing leasing agents to brokers. In any given location, broker’s will almost always charge more than their corresponding leasing agents (makes sense given their added expertise and qualifications). However, a leasing agent in one place may be more expensive than a broker in another – it simply depends on your market. So again, local research is required before moving forward. But let’s identify a few things you should look for.
The average broker and leasing agent fee across the country is right around one month’s rent on a yearlong lease. The way in which that fee is assessed can vary dramatically, though. Agents and Brokers may charge you monthly, usually between 6-12% of the tenants’ amount. This is known as the “standard rate.” Others will charge a one-time, upfront fee after the lease has been signed. You might also find brokers who put half the charge on you and half the charge on the tenant. It can even be split 90/10 in your favor. The good news is, a broker or leasing agent almost never charges you until they’ve filled your property (and if they suggest something else, don’t agree to it). Whatever the broker or leasing agent proposes, remember that you can likely lower their price or change or alter the fee structure. So do some digging and find someone with the right price for you. Keep in mind though, price shouldn’t be your only factor.
Considerations Before You Use a Leasing Agent or Broker
Now that you understand the basics of leasing agents and brokers, it’s time to look into some of the other relevant factors and decide if hiring a professional is right for you. Here are a few questions you need to ask yourself to get on the right track:
- Is my vacancy percentage (a majority of the time) higher than I want?
- Is my monthly mortgage payment higher than the broker fee?
- Are my prospective tenants of the quality that I’m looking for?
- Would focusing my time on other aspects of the job help my business?
- Is one specific property the problem child?
After you’ve thought about these questions for a minute, lets dive deeper one by one. If your vacancy rate is usually higher than your target number, then hiring a broker or leasing agent might be a smart move for you. And if you’re charged more monthly for your mortgage than the broker or leasing agent would charge you to find a tenant, then it’s a no-brainer – go with the pro. These are both straightforward financial decisions and the benefit to your income statement clearly outweighs the cost. But some benefits of using a broker or leasing agent are a bit less obvious.
Evictions are clear evidence that a vacant unit is preferable to a bad tenant. Screening potential renters is a big part of a professional’s job and their goal is to match you with tenants that not only have a strong credit score, but just as importantly, an immaculate rental history. This is where broker’s really shine given their greater knowledge and access. As mentioned earlier, the renter search process is an investment. If you can spend less time finding quality tenants, then you will have more of it available to focus on building your business and improving your properties. And lastly, if most of your properties have high demand, but one proves repeatedly difficult to fill, a leasing agent or broker can be a great resource for that one vacancy. Empty units are lost income. Sometimes you have to spend a little to make a little.
Which Professional is Right for You?
Every landlord and every location is different, so carefully examine your needs and the options available to you to determine which solution is the best fit. Some landlords are in locations loaded with quality tenants, and they just need someone to help market their availability. A leasing agent is perfect here. Others are willing to fork out the extra cash for access to the quality tenants that a broker can send their way. Remember, the difference in price between brokers and leasing agents is there for a reason – brokers earn their fees.
If you do decide that hiring a professional is right for you, make sure you find someone you can trust. Don’t forget, they’re being hired to work in your best interest. Keep this in mind the next time you walk into an empty unit and wonder, how should I fill this?
If you liked this post and you’re interested in more like it, be sure to subscribe to our blog or Like us on Facebook. And don’t forget to let us know your thoughts in the comments!