Generate Revenue With Rentals
Generate Revenue With Rentals
Fishermen often get paid by the pound, so catching a small fish here and there won’t pay the bills. But what if a fisherman was equipped with not just a fishing line, but a whole net? While the fish it catches might be smaller, they would come in far greater numbers and with much more frequency.
Sometimes, it’s not about the size of the fish, but how much you want to fill your boat. According to a Barron’s article written by Gene Epstein a year ago, “roughly 10 million extra folks could be moving into rentals over the next five years” — that’s on top of 40 million Americans already renting. According to census data from the second quarter of 2011, home ownership in the United States has already dropped by more than a million households in a year alone.
As Epstein points out, because “echo boomers [born from roughly 1978 through 1994] are more numerous than the baby busters [born from roughly 1965 through 1977], there are now more U.S. residents aged 15 to 29 than 30 to 44. So five years from now, the nation will have more 20-to-34-year-olds than 35-to-49-year-olds.” And because of the lack of jobs and the flexibility required for job seekers over the next few years, it’s likely that many of them will opt to rent.
To boot, the average renter signs a new lease every one-and-a-half years. That means people typically rent about nine times between the ages of 20 and 34. With this potential rise in the renter population, real estate professionals are truly missing the boat if they’re not involved in rentals.
If you’re ignoring rentals, you could be missing out on this important and growing sector of real estate. According to the Barron's piece, by 2015, there will be:
- 4.3 million more rental units and 1.8 million fewer owned homes.
- 463,000 fewer homes sold, equivalent to about $4.2 billion in commissions.
- 8.5 million more leases, worth $6.8 billion in new rental commissions.
But just like the fishing business, in order for the rental process to be profitable, one must lease out a large number of units in a short amount of time. With rentals producing relatively small commissions compared to sales, tackling this process in the same way it’s been done for the past 20 years may seem like more effort than it’s worth.
However, this once time-consuming, paperwork-heavy system has evolved, so real estate pros can put down that fishing pole and reach for a net.
What if, instead of manually posting each and every property to sites like Zillow and Craigslist, all of your rental listings could be advertised on more than 20 different consumer Web sites with the click of a mouse? What if you could easily organize all your listings (including those from the MLS and property managers) and automate much of the application and credit check paperwork tied to the rental process?
Rental relationship management, a new category of online software that’s evolved over the past couple of years, allows the broker to become the banker, lawyer, marketer, and general manager in the rental process. Web-based software allows users to efficiently manage the tasks and forms associated with each of these roles, all through one technology platform — think salesforce.com, but for rentals.
And with increasingly digital-oriented consumers and real estate pros demanding more collaboration and real-time data, RRM technology is bringing people together online and filling the need for fresh housing market data. When information on property availability is old, vacancies are on the market longer.
What else might smaller fish be good for? Bait.
The rewards of building relationships with consumers under the age of 35 during the rental process goes beyond the commission check brought by the signing of a lease. “Not surprisingly, the home ownership rate tends to rise with age,” Epstein explains. “For example, while the overall U.S. rate is 67.2 percent, the rate for households headed by someone under 35 is just 38.9 percent.” Technology that reminds you to touch base 11 months after you have assisted a client with renting a home not only positions you to be involved with their next move but also helps you build relationships with future home buyers.
Also, many consumers would love to buy but are having trouble selling the home they own. Being able to help your clients move on by renting out their current home can free them to purchase a new one.
Smaller fish can help you catch bigger fish, both now and in a few years.
Rentals are a great way to stabilize your revenue in a challenging sales market and ensure your success in the future. So if casting a line and waiting for the big one to bite isn’t yielding your desired results, it may be time to grab a net and tweak your strategy.