Start A Real Estate Rental Company
- Get You Real Estate License
- Sign Up With A Broker Who Has Real Estate Rentals / Property Management In Place
- Get Educated On Real Estate Rental Software Systems
- Consider Teaming With A Brokerage To Handle All Back End, Rent Collections, Maintenance Calls
- Create The Right Systems
- Hire Help
- Market To Landlords
If you are a real estate agent looking to start a real estate rental company then this is the place to be. Learn how we grew our rental division from a handful of properties owned by investors that we sold property to, to building over 1000 landlords serviced.
We will go into detail on how my sister I and built this from scratch making six figures, year after year, renting real estate as well as eventually listing and selling many of these properties.
So how did we get started with our Real Estate Rental Company.
In 2003 I got my real estate license. It took a good couple years to get established as I didn’t have too much mentoring or training. I began hitting the pavement and linked up with some investors who were looking to acquire rental real estate in their portfolio.
Many were newer investors. For some, this was their first and others had maybe a couple in their existing portfolios. Overtime I gained the trust from them and they wanted me to lease their properties. How hard could it be? Right?
Well, I had no clue what I was doing and I was fairly busy selling more property to other investors. I didn’t have much time for rentals and almost passed them along to another brokerage. I’m thankful that I didn’t.
I called my sister, Jennifer – “The Real Estate Rental Queen”
At the time, she was making around $100k a year bar tending and managing a bar in Ft. Lauderdale (Cafe Iguana) and a nightclub in Miami (Crobar). It was great money but the lifestyle was insane. Sleep all day, work until 6am. She has been in this scene since she was 19 years old.
I called her one day and explained I needed help. I needed someone I could trust to service these people who wanted to lease their properties. I didn’t know what to expect. However, she was receptive to it. She was over the whole bar scene and wanted to live a “normal” lifestyle. Well a real estate rental company is not a normal lifestyle for most.
She agreed. She move to the west coast of Florida, got her real estate license in a few weeks and sold her Ft. Lauderdale house. This all happened very quick. Remember. You got to have momentum in life! Initially she was still going to the east coast on the weekends to continue to bar tend. We were not making too much money initially so it was imperative that she travel there for the weekend which lasted about 3 months.
This is the type of sacrifice that I explain in other articles on this site. You have to give up a lot to get a lot!
First Week In Our Real Estate Rental Company
Jen had no clue what she was doing in real estate rentals or dealing with landlords or tenants. And I wasn’t necessarily the one to train her. However, she had a strong work ethic and worked well with people.
I gave her 5 properties to lease which I had listed for about a month. I was only able to lease one property that entire time. She took these on and leased all of them in her first week.
I asked how the hell did she lease them that fast? She placed all the properties on Craigslist which at the time was still fairly new. It was Game On!!! So I thought.
Or Game Over! No More Rental Inventory!
Jen said she wasn’t interested in going back and forth to the east coast to pay her bills. We knew we needed to do something fast to generate more income.
So we formulated a plan to get in front of other people who own property who would likely list with our Real Estate Rental Company. So we targeted absentee owners.
We decided to get on an aggressive mail campaign to target market absentee owners. There are many resources these days to expedite this process with certain print / mail companies at wholesale pricing. They can do it all for you! However, at the time, we did it all by hand.
The Flyer pictured here is one actual flyer we used time and time again. We had these professionally printed on gloss paper. We would stuff them into a white envelopes, add two business cards and hand wrote every address on the envelope. CLICK HERE for complete flyer.
We would hit the same communities of absentee owners every quarter. We picked communities that we knew had more investor owned as opposed to a second home. This worked very well, so choose your target wisely.
We also selected ideal Real Estate Rental communities that were fairly close to each other. This made it easy when showing properties to prospective tenants. You could arrange your scheduling to show multiple tenants in one session.
Our mail campaign was our weekend and nightly tasks. It was painstaking work but it was worth it! We grew and grew quickly. We grew fast enough that we were fortunate enough to be able to hire our first employee.
Real Estate Rental Company Employee
Our employee had multiple roles. One of which was pumping out 125 pieces a day. 5 days a week. Her other role was inputting all of our inventory on Craigslist. Her third role was meeting prospective tenants at the office to go over the application and take deposits.
We Need More Realtors To Handle Prospective Tenant Calls
I get a frantic call from Jen.
J – “Steve, I can’t handle this!!”
S – “What can’t you handle?”
J – “Prospective tenants are calling me like crazy and I do not have anymore time to show the inventory.”
S – “Ok. Let’s get an agent to exclusively handle all of the tenant calls and showings.”
J – “Deal!”
And that is what we did. However ,we brought on a total of 3 real estate agents to handle the rentals in a 60 day period. We paid them $150-300 per property they leased. Straight commission. They were happy, averaging 3-4 a week. Not a bad gig especially for new agents.
We had our secretary run the CL ads with phone numbers direct to those agents. This bypassed any calls to Jen and she had immediate relief. The agents just had to answer calls and set appointments. This worked out well.
Jen would process the credit and background, review it and if thumbs up, would draft the lease, take deposits and handle the move in. As mentioned in our article How To Build A Real Estate Team in your First 12 Months – We had a well oiled machine.
Showing Prospective Tenants – Get your schedule right!
One big piece advice I have to give you is to pay close attention to time management when showing your inventory to prospective tenants.
For example. We would run ads that said, No Phone Calls. Show up if you want to view this from 10-11 on Friday 1/15/16. We usually had plenty of interest and would lease these out doing one or two of these open house style set ups.
The other alternative was when calls came in we would say the agent is showing the property tomorrow at 4pm. Be there at that time sharp. We would have a handful show up.
Think about it. If you took every call, set every appointment at different times, it would take up your entire day and gas money. We created competition among the prospective tenants. First one with filled application and application fee in hand took it. We would hold backup up applications, in order, without depositing the application fee.
Real Estate Market Crash of 2008
Do you think our real estate rental business suffered? Nope! It actually got better! All of these investors that were trying to buy and flip got stuck. Some we helped to Short Sale their properties and avoid foreclosure.
Others took their properties off the market for sale and listed with us to lease. Our revenue increased almost 30% each year for the first few years when we were at the bottom.
How we made $55,200 Off Of 2 Brothers with Two Rental Properties
As mentioned in our article on Build Your Real Estate Sphere of Influence, I go into detail on the importance of not just building your Sphere but nurturing it.
We signed up 2 brothers, each with a condo in a high rise in downtown Fort Myers. We leased their properties for 9 years. When we calculated this out, our Leasing Fees (Read Below) for both places over nine years equated to $32,400. We sold both units fairly quickly and made $22,800 from commissions. That’s a total of $55,200. These stories became more common even to this day.
Jen has done a fantastic job in staying in front of this database. To this day, we are still listing properties for sale that we have in our rental program over a decade ago.
If you do intend on building a Real Estate Rental Company, be sure you are staying in front of them on the sales side. You can twist it that your partner handles the sales and you handle the rentals. Either way, you have to market to this group on a consistent basis.
Landlords Grow Their Rental Inventory
Let’s not forget about the obvious. The landlords you have in your pipeline are real estate investors. When I say, stay in front of them, I don’t always mean try to sell their property. They maybe looking to increase their size of their portfolio.
So scour the MLS for deals specific to each investor. Go look at them. Video them and send them emails. “I came across this property in Bella Terra where you already own. Looks a bit run down but maybe able to get it for a good price. Let me know if you are interested in taking a look at it.”
Investors many times will want to keep their portfolio close together for ease of management. You just created a commission sale and another residual income money maker off the real estate agent property management.
Blanket Deals. Don’t be afraid to send a mass email to all the investors with just a hell of a deal like a 20 unit currently at a 9% cap with potential for a rent increase bringing the added value to over a 14% cap. Go video tape it and walk them through your numbers!
Use Video In Your Real Estate Rental Company
Your real estate rental company will grow faster with video. If you do not like being on video, that is fine. Video the properties while talking about them. You may warm up and add clips of yourself in them sooner than later. PS – An Awesome tool I use is the handheld Zhiyun Smooth. Pictured to the left.
This thing is incredible. It is a gimbal stabilizer, has focus and zoom capabilities, control panel with trigger switch, tripod attachment, time lapse and object tracking (where you can walk around and it will track you as you walk!). It can connect to any smart phone, go pro or any other camera.
I would video not only hot deals coming to market but also videos for future landlords like the introduction of your team, application process, lease agreement, interviews with contractors and even their property walk through after a tenant departs. Welcome videos for tenants and get them primed to buy in the future. Videos of check ins and check outs to safeguard against damages. The ideas are unlimited.
How Do We Charge For Rental Services / Property Management?
Well we actually do not do property management. See below. We charge a flat fee equal to one month’s rent with a minimum of $1,500. If a tenant renews their lease after 12 months, we handle the renewal lease and charge 50% of the flat fee ($750).
We do not handle any maintenance calls, collecting of rents, late night phone calls, none of it. We do provide the landlord a list of contractors and handymen and also encourage them to pay for a home warranty management plan where it is a flat fee and they handle all of the service calls.
We never held escrow at our real estate firm, therefore in Florida we couldn’t do legit property management. We left money on the table but we were so busy with this, selling real estate and personal investing that we never pursued it.
Money Left On The Table – No Property Management
Don’t get me wrong… We did talk about it. Let’s say you charge a flat fee up front with a 10% management fee, you can build a nice fat residual income for you and your team. So it is worth looking into this and speaking with your Broker on how to structure it. Some brokers will not allow it as they do not have the infrastructure in place. So be sure to ask these questions when Interviewing Brokers.
But let’s say you charge a flat fee upon tenant move in equal to one month’s rent. Say $2,000. And you charge 10% of the monthly rent = $200. That is $4,400 on the first year. Multiply this out by 100 doors = $440,000 annually. This number will be lower as some tenants will stay after one year and you likely will not get the flat $2k fee again. Maybe negotiate a lesser fee at 50% for renewal. Regardless, this is big money if you decide to build a Real Estate Rental Company.
The Tenant Bought The Property!
In our Lease Listing Agreement, we always added an additional addendum between Broker and Landlord that states if the tenant purchases the property in the future that we handle the contract and the landlord owes us 6% commission. I think we only had about 10 tenants that actually did, but without it we wouldn’t have those commission dollars in our pocket.
Tenants are Buyers
Yes. You just built another database which is now part of your Sphere Of Influence. They too will become buyers one day.
Some may have shit credit. Find a legit credit repair company or a good mortgage person who can refer them to.
Show you are there to help. Keep them motivated. Guide and mentor them. They will eventually use you to purchase their home.
Quick Rental Story
One of my contractors I use for buying and flipping was renting for almost 8 years. I actually short sold his house a while back. He and I became friends over the years and every time we would meet up to have a beer, I would press him why he hasn’t’ bought a house yet. Finally, he said he would agree to work on it.
I had my mortgage guy call him. He just thought his credit nor income was good. My mortgage guy got him approved for $170,000 and he was lit up. 60 days later he is in his house with wife and two kids. And we got him a fixer deal that is now worth about $60k more with $12k into it as he does all the labor.
Do I Need A Real Estate License To Start A Property Management Company?
Not necessarily. You will need a real estate license if you are showing, leasing and collecting rents on leases 6 months or longer. You do not need a real estate license if you are dealing with vacation rentals less than 6 months. But check with your state, attorney and a real estate broker.
However, if you decide to start a Vacation Rental Management company, it will not hurt to have a real estate license. We have a husband / wife team who have a vacation rental management company in our office.
They have real estate licenses and get the added benefit from assisting people buying and selling when the opportunity arises. You will be in a comparable business and if you have the license to assist, then do it.
What is the difference between Vacation Rental Management and Annual Rentals / Property Management?
Vacation Rental Management is creating income for property owners who wish to rent their properties for the short term. Many times in our area of Southwest Florida, these rent as quick as 3 days and as long as 90 days in most cases. There is intense management that goes along with this. You have to understand this is comparable to servicing people like a hotel and providing incredible guest services.
Annual Real Estate Rentals are usually less intense as you have one tenant that you work with per year. Also you do not have to deal with cleanings, check in’s / check out’s, etc. Less management but still a bear, unless you do what we did with our “Tenant Placement Division.”
Build Your Real Estate Rental Company
If you want to build your Real Estate Rental Company, be sure you go after the right market that you will enjoy. You may want to consider going and working for an existing property management rental company initially.
You will get an inside look on their systems and procedures. You may gain some great ideas and also see where they are lacking. In my experience there are many unhappy landlords dealing with their rental companies and / or real estate agents. So there is prime opportunity for someone to come in with great customer service to knock it out of the park!
It could be you. Stay FOCUSED and motivated. There will be ups and downs. Just keep an eye on the ups and enjoy life.