Where Did the Quality Renters Go?

Leasing agencies deliver, but costs may not pencil out

by Robert Griswold

Q: I have been a landlord for many years and have always been quite successful with simply placing a rental sign in front of my property when there is a vacancy. However, the economy in my area is getting worse and I have had one rental house vacant now for more than three months. It’s tough to have to pay the mortgage each month without rent coming in for this property.

A local Realtor has seen my sign for so long that she keeps calling me and encouraging me to sell the property. But the sales market is so soft that almost all of my equity is gone and I don’t want to give it away.
I spoke with another landlord recently who told me that he’s also had more trouble than usual but has begun using leasing agencies that specialize in matching up tenants with landlords. I checked out the company he recommended and they charge a full month’s rent to place a tenant in my property. That seems like a lot, but I don’t seem to be able to generate any good prospective tenants on my own.
Do you have any thoughts about leasing agencies?

A: One of the recent trends in rental real estate is the emergence of firms that assist tenants in locating rental units. These services are available in virtually every major metropolitan area. Some offer their services for no charge to the renter and are compensated by the landlord or the property manager when the prospect signs a rental agreement.

Other rental locator firms charge tenants for their services and are compensated only when they find a rental unit that meets the needs of the renter. These are often companies that work with employers who are relocating employees to the area for high-profile jobs. With the current economic downturn and likely an overall reduction in relocating employees, it may be more difficult to find leasing agencies that are paid by an employer.

Although most owners of single-family, condo, or even small- to medium-size multifamily rental properties do not need the services of a leasing agency, there are some definite advantages to consider.

Leasing agencies that get paid by the landlord or property manager are likely to have close working relationships with major corporations and relocation services and have excellent tenants looking for rentals.

These tenants relocating into an area typically do not have the time to search for a rental property and want the leasing agency to handle matters for them. They also are not often candidates for purchasing a home, because they will be staying only for a specific assignment or because they want to rent in the area before making a purchase decision.

However, there is often a trade-off with these renters: They are usually very well qualified, but they are not as likely to rent long term. The reality is that not all tenants will stay for a long period of time anyway, and if you know that the tenant will be with you for only a set period (such as a one-year lease) you can adjust the rental rate to reflect this rental term.

This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of “Property Management for Dummies” and “Property Management Kit for Dummies” and co-author of “Real Estate Investing for Dummies.”

E-mail your questions to Rental Q&A at [email protected].

Questions should be brief and cannot be answered individually.

Copyright 2010 Inman News
See Robert Griswold’s feature, Criminal Record Puts Squeeze on Renters.
American Apartment Owners Association offers discounts on products and services for landlords related to your rental housing investment, including rental forms, tenant debt collection, tenant background checks, insurance and financing.  Find out more at www.joinaaoa.org.