Leasing agent question

[Ariana Soto]

Hi all, I need your help, plz. I own a couple SFHs in another state and I need a leasing agent quick but doing a Google search for “leasing agent” OR “listing agent” I’m only finding stuff about real estate agents and maybe property managers.

I don't want a real estate agent per se (unless required to be licensed for leasing) b/c from my first hand experience they have always found me short term tenants who moved out immediately after finding a home (I think because they do MLS ads which hits mostly the prospective home buyer market and I think they also prospect for themselves). I don't want frequent turnover. I'd rather take a lower credit score and have them stay for many years.

Does anyone do leasing full-time or is my only other option a PM? Do all PMs do leasing and is it a big enough part of their job that they’re naturally good at it/sales? Would they take on clients for just the leasing portion and nothing else (I have the rest handled but need someone mostly for showings and photo/documentation since my maintenance guy is not good at that). Should I be searching for other keywords?

I’m looking in Chattanooga TN, by the way, if you have any recommendations! 

Thanks very much.

[Richard F.]

Aloha,

Real Estate Licensing laws vary from state to state, but in many you MUST be licensed for typical RE "activities" such as selling, renting, negotiation, etc. Any Full Time PM might be willing to place tenants for you, but you need to be specific about exactly what you want, what your requirements might be, and a reasonable time frame. You would NOT normally have any decision making capability regarding Tenant selection once the PM accepts the job, because they must adhere to Fair Housing laws, and they are the ones on the hook. Read your Agreement carefully, ask questions, and do not use a "PM" that only handles a few properties and is actually focused on Sales. You need a dedicated PM that will have systems for screening, showing, move-in, marketing, etc. not some hungry new Agent that may well have less experience than you. Also, you need to be sure YOU have systems in place to handle your new Tenant. No Agent is going to appreciate an unhappy Tenant they placed, complaining to them about a non-responsive LL.

[Brian Levredge]

Unless they have direct ownership of the property, whoever does your leasing must be a licensed agent.  As an aside PM companies (I own one) are real estate brokerages in TN and almost every other state.  Now having said that does this provision get ignored all the time?  Yes.  I"m not passing judgment or giving advice.  Make your own choices.  You'll typically pay 50% of one month's rent for tenant placement.  Some charge more, but that amount is pretty standard.  So if you have a unit that rents for 1k or 1.5k/month it may not be worth it to many agents.  Conversely, most of the PMs here in Chattanooga won't do just leasing but you might find someone.  I'd recommend looking on the FB search engine and typing Chattanooga Real Estate Investing.  It will give you a bunch of pages you can join and ask around.  Best of luck! 

[Ariana Soto]

Quote from @Richard F.:

Aloha,

Real Estate Licensing laws vary from state to state, but in many you MUST be licensed for typical RE "activities" such as selling, renting, negotiation, etc. Any Full Time PM might be willing to place tenants for you, but you need to be specific about exactly what you want, what your requirements might be, and a reasonable time frame. You would NOT normally have any decision making capability regarding Tenant selection once the PM accepts the job, because they must adhere to Fair Housing laws, and they are the ones on the hook. Read your Agreement carefully, ask questions, and do not use a "PM" that only handles a few properties and is actually focused on Sales. You need a dedicated PM that will have systems for screening, showing, move-in, marketing, etc. not some hungry new Agent that may well have less experience than you. Also, you need to be sure YOU have systems in place to handle your new Tenant. No Agent is going to appreciate an unhappy Tenant they placed, complaining to them about a non-responsive LL.

Aloha and thank you! RE: "do not use a "PM" that only handles a few properties and is actually focused on Sales"...do you mean they should be managing many because that means they're more reputable or in-demand? I actually was prepared to ask this question but for the other reason--that if they have too many clients, they may be slow in response time and not have enough bandwidth to give my properties enough attention. On the latter, did you mean they should be focused on sales or not? 

Lastly, on the PM's systems vs my systems...where does the division of labor actually lay? I have all the systems in place since I have been managing these homes on my own the past few years, but I am guessing they will want to own the majority of these processes or do they give some ownership to the home owners? For example, I have my own lease, I collect all my rents in Innago, and I do all my tenant applications, and credit/background/eviction checks in Innago. Are those things they would continue to allow me to use or do? I had someone manage my leasing once that refused to share the credit reports of tenant prospects so I started handling it on my own because I felt it was important to have that visibility. I hope PMs are flexible in this sense. I do not need to own much of it, but things like tenant selection are paramount and I don't know that I can trust their judgment since they may have different motivations than I do. I appreciate your help!

[Ariana Soto]

Quote from @Brian Levredge:

Unless they have direct ownership of the property, whoever does your leasing must be a licensed agent.  As an aside PM companies (I own one) are real estate brokerages in TN and almost every other state.  Now having said that does this provision get ignored all the time?  Yes.  I"m not passing judgment or giving advice.  Make your own choices.  You'll typically pay 50% of one month's rent for tenant placement.  Some charge more, but that amount is pretty standard.  So if you have a unit that rents for 1k or 1.5k/month it may not be worth it to many agents.  Conversely, most of the PMs here in Chattanooga won't do just leasing but you might find someone.  I'd recommend looking on the FB search engine and typing Chattanooga Real Estate Investing.  It will give you a bunch of pages you can join and ask around.  Best of luck! 

Thank you, Brian! So nice to see a fellow Chattanooga investor!! :-) I have been paying one month's rent for leasing (when there is no PM contract), so I think that half month's rent is only if you are already using them for PM, right? And by FB do you mean Facebook? Thanks.

[Richard F.]

Quote from @Ariana Soto:

Quote from @Richard F.:

Aloha,

Real Estate Licensing laws vary from state to state, but in many you MUST be licensed for typical RE "activities" such as selling, renting, negotiation, etc. Any Full Time PM might be willing to place tenants for you, but you need to be specific about exactly what you want, what your requirements might be, and a reasonable time frame. You would NOT normally have any decision making capability regarding Tenant selection once the PM accepts the job, because they must adhere to Fair Housing laws, and they are the ones on the hook. Read your Agreement carefully, ask questions, and do not use a "PM" that only handles a few properties and is actually focused on Sales. You need a dedicated PM that will have systems for screening, showing, move-in, marketing, etc. not some hungry new Agent that may well have less experience than you. Also, you need to be sure YOU have systems in place to handle your new Tenant. No Agent is going to appreciate an unhappy Tenant they placed, complaining to them about a non-responsive LL.

Aloha and thank you! RE: "do not use a "PM" that only handles a few properties and is actually focused on Sales"...do you mean they should be managing many because that means they're more reputable or in-demand? I actually was prepared to ask this question but for the other reason--that if they have too many clients, they may be slow in response time and not have enough bandwidth to give my properties enough attention. On the latter, did you mean they should be focused on sales or not? 

Lastly, on the PM's systems vs my systems...where does the division of labor actually lay? I have all the systems in place since I have been managing these homes on my own the past few years, but I am guessing they will want to own the majority of these processes or do they give some ownership to the home owners? For example, I have my own lease, I collect all my rents in Innago, and I do all my tenant applications, and credit/background/eviction checks in Innago. Are those things they would continue to allow me to use or do? I had someone manage my leasing once that refused to share the credit reports of tenant prospects so I started handling it on my own because I felt it was important to have that visibility. I hope PMs are flexible in this sense. I do not need to own much of it, but things like tenant selection are paramount and I don't know that I can trust their judgment since they may have different motivations than I do. I appreciate your help!

Sad to say, but Sales Agents are driven by commissions, big commissions, while Agents that primarily are focused entirely on PM are generally salaried, perhaps with a small commission when they procure a new client or rent a unit. The PM Company may make a larger fee overall, but that is going to pay for accounting, reception/admin, salaried PM's, overhead and profit. A smaller, "one man band" type of PM company also has some or all of those other positions to pay from your Management Fees. In other words, if Sales is where the money is, PM issues will be secondary in time and effort to many Agents. If they are primarily PM focused, they should have good systems in place; reliable, reasonable vendors; and a good document package. The more units they have managed for a long period of years, the more experience they will have with all types of maintenance, repair, screening, and tenant management issues and will know what to do and exactly who to call.

With regard to your systems, that would need to be completely discussed and negotiated before EVER signing any Management Agreement. Typical contracts will state that the PM duties are "to manage" the property. They are not at all likely to use your lease agreement due to high potential for legal issues. A typical Rental Agreement will have room to add specific clauses and details in order to customize them for a particular property or Owner, but as existing agreements reach their end date, I would be sending notice of non-renewal, and advising Tenants they will need to submit a new application and get approved before signing our Rental Agreement if they plan to stay.

A legit PM would not typically seek or accept feedback on Tenant selection, due to the risk of Fair Housing violations. Again, an experienced PM will have a solid system for acquiring and approving Tenants. They should be able to outline the key criteria that they use (which, again, may be a negotiable point, but will require a detailed discussion), but there would be no discussion regaridng specific prospects until after approval. Generally the Rental Agreement is between the PM and the Tenant, you would not be named anywhere or have any legal standing.

[Brian Levredge]

Quote from @Ariana Soto:

FB=Facebook.  Leasing commissions are to an extent negotiable, but yes, you are generally correct.  Piggybacking on some of the other comments in this thread a good PM will allow you to scale your investing business.  Yes, it's a cost and not a small one at that, but there's also a premium for your time, or there should be.  If you're the type that wants to exercise a lot of control over the PM then I would suggest working with someone who handles most everything themselves.  They will be small because of that, but that also means more responsive to the clients they do have.  
A good PM (as mentioned here) will also have their own systems in place.  If you want them to manage your portfolio then you need to be willing to change and adapt to their systems/processes.  It's also important that you can communicate and get along with your PM.  Personality fit is somewhat important as this person will be taking care of your assets.  

[Ariana Soto]

Quote from @Brian Levredge:

Quote from @Ariana Soto:

FB=Facebook.  Leasing commissions are to an extent negotiable, but yes, you are generally correct.  Piggybacking on some of the other comments in this thread a good PM will allow you to scale your investing business.  Yes, it's a cost and not a small one at that, but there's also a premium for your time, or there should be.  If you're the type that wants to exercise a lot of control over the PM then I would suggest working with someone who handles most everything themselves.  They will be small because of that, but that also means more responsive to the clients they do have.  
A good PM (as mentioned here) will also have their own systems in place.  If you want them to manage your portfolio then you need to be willing to change and adapt to their systems/processes.  It's also important that you can communicate and get along with your PM.  Personality fit is somewhat important as this person will be taking care of your assets.  

True true. I vetted the PMs well and asked them a ton of questions so as long as I trust them and their philosophies, I'm willing to give up all the reigns. By the way, I posted in like 8 Chattanooga FB groups and not one person responded. I have always found FB real estate groups to be mostly spammy :-(