If you sell homes, should you also work with renters? And, by the same token, should you work with sellers and buyers that are in a price range well below your normal home sale price?
These are tough questions because, as a real estate agent, you have to spend your time wisely. It’s easy to get sucked into doing lots of different things that make you little to no money. So, if your normal home sale commission is, for example, $5000, is it a wise move to work with renters where your commission is maybe 10% of that?
There are two schools of thought regarding how to approach this:
- Work with everyone: you never know who might end up being a long-time client with bigger deals you can be a part of down the road
- Work only with your perfect client and no one else
Personally, I’ve put together a fair amount of rental deals and I’m calling it quits. I’ve worked on enough of these to get a pretty solid understanding of the average outcome and I’ve decided to now only work with those in my target market.
In my local market, the average home sale price is roughly $400,000. That’s somewhere in the $10,000 to $12,000 commission range per deal. The average rental deal nets me about $700.
Hmmmmm….do I want $10,000 or $700?
Now, if rentals actually took me only 7% of the time that purchases did, then maybe this would be a fair deal. But, they don’t. Renters still want to see 3 or 4 or 5 or 6 or more places, just like buyers. So, although they don’t typically take as long as a buyer may take in transacting a deal, there’s still a significant amount of time wrapped up in all the things that are required to get a rental to actually come together.
For those of you that do take on renters, I’m guessing that you’re now thinking…
- but renters could be deals down the road
- renters could turn into buyers right now if (fill in the variable here)
- you should help anyone and everyone all the time
- why turn down a potential client who could refer other people to you
All these are valid points, but…
…the bottom line is that if you don’t run your real estate business, your real estate business will run you.
At this point in my business, I’m not drowning in more awesome leads than I know what to do with. However, I am busy every day and I definitely don’t make all the “follow up” and “stay in touch” calls that I should because I am working on active deals.
So, my point is that, if I don’t have time to make the “perfect” day every day by making all the calls I should to people who can result in relationships that are worth $10,000 within the next few months, why do I have the time to work with renters who might possibly be worth a fraction of that within the same time frame.
In the same 8 hours I might spend on a rental deal, I could have had great conversations with large number of prospects and past clients that are worth more both now as well as in the long run.
Sure, it’s possible that I might lose out on a rental deal that turns in to a buyer next year when their lease is up.
But, it’s also definitely possible that the 4 leads I got from an open house last weekend at a $700,000 home are going to buy something really soon.
I’ll take my chances with the buyers.
What’s your take? Do you work with renters? Do you work with buyers/sellers below a certain price point that doesn’t make financial sense to you? Leave a comment and let us know.