Real Estate Niche: Rent

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Published date: Aug 25, 2020
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Friendly realtor shacking hand of happy couple

If you are just starting out as a real estate agent or if you want to revitalize your business, there are plenty of opportunities in real estate that allow you to do just that. Going into rental property is just one of them. The US economy is influenced by many industries and real estate is one that plays a big role in it. A real estate license opens up a lot of opportunities, one of them being the rental market. You can become a real estate attorney if you have some legal background, maybe a real estate investor if you would like to go head first into the real estate market or even a leasing agent for a quick income, among others. 

As you decided to become an agent you should know that the real estate market is broad and there are many opportunities in real estate available to you. These opportunities depend on niches. There are many niches that may interest you however it might be beneficial for you and your business to find your own niche, the one that fits you best.

How to pick a real estate niche?

When it comes to finding a real estate niche one must take into consideration a number of factors. Picking a niche might limit you in some ways but it will also make you excel in your particular field. If you look around the office or among your colleagues at conferences you will come to realize that the most successful real estate agents don’t juggle with every type of transaction. They usually find their niche based on a number of factors and focus on that. And on that they truly are rockstars. As experts they are better equipped to make their customers happy than they would be capable of if they would have dipped their toes in every kind of real estate transactions. 

That is why it is important to find your niche. To know what the market needs as well as what you are passionate about. It could be foreign investors or vacation homes or more socially inclined niches like retirees or finding homes for the disabled, as well as other niches worth considering. If you don’t like what you’re doing and put passion into it then you wouldn’t be able to enjoy it. So find a real estate niche that entices you in the right way through a few easy steps.

1. Study the market

This depends on where you live and what is closest to you. What the options are in your neighborhood and what kind of potential clients you have around you. If you live in a retirement community you may find it easier to focus on retirees who are a very diverse demographic. If you live in a tech neighborhood you could find it easy to start off as a leasing agent for all the millennials and young professionals who are not yet ready to buy.

2. Figure out what fits you

Think about why you leaned towards real estate in the first place. Whether it was the amazing architecture of the old district in your town, the skyscrapers that offer those great views and model the city around them, or green housing that helps and improves the lifestyle of the owner as there are many environmental threats for real estate developers, pick your reason in order to use it. Your passion will motivate you, will push you and help you be compelling enough in order to captivate your clients.

3. Browse through your contacts list

Everyone has a relatively large number of acquaintances in their phone or through their families that can be potential clients. The community that you belong to might just be your starting step. So get involved in order to make yourself and your business known. Like that, when someone is looking for a realtor, they might just come knocking at your door. Once you figure out your niche you can also get certified for your specific real estate niche and have something extra that your potential competition doesn’t.

Unusual real estate niches

businessman gives key to man in military uniform

As in any field or industry, something that is unusual tends to draw attention. What is important to keep in mind is that unusual should not mean uninteresting and certainly not unmarketable. And something else … it should have the potential to bring clients. For this you have to take into consideration what is available in the market. If you have a tech hub nearby or a military establishment who could rent that will offer you a clear target for customers and all you need to do is find the properties available.

Types of unusual real estate niches

There are some unusual niches in real estate that you might not be aware of, but that can be highly profitable when handled correctly. Browsing through your possibilities before you decide on which real estate niche fits you better will only benefit you in the long run. Here are a few options that while they might seem limiting, they are the opposite if you focus on it.

  • Luxury real estate
  • Upgrading real estate
  • Holiday/Second home real estate
  • Military personnel
  • Millennials
  • Retirees
  • Rental properties

Is rental a profitable real estate niche?

White mug filled with coins

When you look at rental commissions and selling commissions you will see a very big difference between the two. This alone makes a lot of real estate agents work with sellers/buyers, and I should say a large majority of real estate agents turn away from rentals. It seems like a sensible decision seeing as it isn’t considered as profitable as selling or buying is. However, it generates a faster income. Especially if you list your services on The Official Real Estate Agent Directory®, your income will increase faster.

If you take a look at purchasing transactions and their timeline you will understand. It can sometimes take as long as 6 months to close a sale. That can mean 6 months without income, in those extreme situations. Commissions for closing a sale, however, are in the thousands of dollars but if you don’t manage your finances you might end up with a hole in your pocket.

As a rental agent or a property manager, you might find that you can get checks several times a week. While these checks might be smaller, they add up and by the end of the week or month, if you hussle you might wind up with a figure that’s similar to that of a residential sales agent. Especially if your business operates in a city like Washington D.C. where there is a higher demand for rentals. But how much does a real estate agent make?

 

Comparison of income

To make it simple, we’ll take a look at the weekly, monthly and annual income for both real estate agents that help sellers and buyers in order to compare them to real estate agents that work with rentals.

Real estate agents working with home buyers/sellers

A seller/buyer real estate agent works mostly on commission but they can also have a fixed income from the agency as well as those who pay the real estate agent. That fixed income, however, is generally small and the big influx comes from commissions. Those commissions come from each particular sale. They receive checks any time they help a client sell or buy a property. The commission is calculated as a percentage of the sale price. If you sell 2 properties a month you will get a monthly commission, based on a selling price of $200,000 and an average 6% commission rate that splits 50/50 between the listing agency and the buyer’s agency, then 60/40 between agent and broker, of around $7,200. For 10 sales every month, your commission could be as high as $36,000, but let’s get back to earth. With 2 sales every month, your annual income would be around $88,800. However, the monthly average income for real estate agents in the US is $6,000 while the annual average is $84,500.

If you are a rental real estate agent

A realtor fee for rental property is around 10% of the annual rent for the property. Some real estate agents have another variant of commissions and instead of a fixed percentage they have a realtor fee for rental property that is equivalent to a month’s rent. But let’s go to the averages. The average rent in the US is around $1,200, this takes the annual average rent costs to $14,400. A realtor fee for a rental property based on the average rent cost will be $1,440. In regards to rental properties there is a benefit, however. Your clients are more common, your rental properties are more flexible and the checks generated from them come faster and more often. So, with an average of ten rentals signed per month a leasing agent can get to around $14,400 income per month. That would go to an annual income of $172,800.

Closing a sale for a property can take from 1 month to 6 months, or even more if we’re talking about luxury properties. Closing a lease for a property, however, can happen on the first day. If you work as a real estate agent for rentals you could close several leases a week. Furthermore, if you become a property manager for a residential complex with several condos for rent, you can get even higher income. Realtors fee for rental property in this case can be 200% of the monthly rent for rentals that last at least 11 months .

Is rental property a good investment?

mini house placed on a stack of coins

In order to become a good real estate agent for rentals you have to understand how to promote the idea to potential landlords. Many of them decide to rent a second home as vacation rentals or for long-term renters, there are also those who may look into becoming real estate investors, or, as a real estate agent, you might be interested in real estate investments. So, is rental property a good investment? The short answer would be, yes. But let’s see why. And let’s see what is a good rate of return on a rental property.

As investment, rental properties generate a steady passive income. This means that you will get a monthly influx of profit with little to no time used. In order to promote this idea you have to first understand how to calculate ROI (return of investment) on a rental property. Once you get your ROI you will know if you can get a good rate of return on that rental property. Generally speaking the rate of return should be around 8% of the purchasing price for a monthly income from rental property.

What is a good rate of return?

Anything above 8% ROI is a good investment for the landlord or investor. Based on this 8% ROI or rate of return we can also see the rule of thumb for rental property. In general, when you consider getting into the rental market you have to pay attention to the following rule of thumb for rental property prices and income from rent. 

For example from a property that was purchased with $100,000 you should see monthly rent of 1% from the purchase price at least. That is the rule of thumb. If you have a property that can generate at least 1% of its selling price on monthly rent then you can look into investing further in that property. However, if there is little to no chance of generating at least 1% income, then that is not a good investment.

Why rent through a realtor?

Leasing concept with businessman handing keys

Some landlords find that renting through a realtor can bring them countless benefits. But why use a realtor in 2020? One of the most important gains from renting through a realtor is that they no longer have to spend their time on listing the property, looking for renters and dealing with any stress related to that property. All of that is transferred to the leasing agent. Realtors take care of the marketing part of the leasing, look through applications, schedule the viewing of the property as well as take care of the screening process and background checks for tenants. 

Realtors also have a database as they are constantly looking for new clients as well as potential buyers or renters. Because of that database it is easier for a realtor to find possible tenants just through their daily activities and interactions.

Part of the leasing agents job is to negotiate the terms and conditions of the lease. They can negotiate the price if they consider it too high. They are aware of the current situation on the market and they can set the right price for a rental property. If there is a pool or a gym on the co-op property, they can negotiate the prices for amenities, check if the cost of maintenance is included in the rent, if you have to pay extra for parking and so on.

The time consuming factor is also beneficial to renters. Nowadays, it is very time consuming to browse online for listings and everyone is really busy working with work and life. A realtor does that as it’s part of their job description as leasing real estate agents. New units can open and close in a matter of hours. Realtors can book showings instantly so that when the client is available, they can go for a viewing and have higher chances of being selected. 

 

Conclusion

Taking a look at these numbers you can understand why living off realtor fees from rental properties might not be the easiest way to generate income. Leasing realtors might need to close several contracts in order to get to what one sale’s profit can bring to sellers/buyers realtors. What this niche can be very effectively used for is to build up your client base. All those renters that generate a solid and steady income will someday become buyers. Similarly, all those landlords might become sellers at one point. By nurturing these relationships from the rental stages you will be able to generate a larger profit when that happens. It could be a few months, a year, three years, but when the time comes those clients will turn to you as they built a healthy relationship with you.

Let us know in the comments section below what your take on the whole leasing agent situation is and whether you would like to take that path either in the beginning stages of your realtor career or many later if you want to re energize your database. Like & Share this article with any realtor friends that might be looking into new and interesting real estate niches.

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