Does a Rental Division Make Sense?

By Melanie Robitaille, Sr. Staff Writer & Graphic Designer

When looking for a rental, finding a REALTOR® may not come to mind, but with a growing number of savvy investor and property management agents in the industry this might be about to change as a move to multifamily real estate begs the question, what floor will you get in on?

CONTRIBUTING FACTORS

Factors such as housing shortages, affordability, and those tapping into their equity are driving the rental necessity as Tommy Stanton, Franchisee of EXIT Realty Gulf Shores and EXIT Realty Orange Beach in Alabama has seen. As the office names imply, his markets include some of the most highly sought after, tourist waterfrontage in the state, and he’s the next generation in a family brokerage that made the calculated decision to diversify their real estate efforts decades ago.

“Right now, rental rates are so high that it would actually save someone money if they had a mortgage. The biggest hurdle I’m seeing though, is affordability. The buying prices are at an all-time high as well. Interest rates keep creeping up, and I’m seeing a lot of buyers who qualify but may not have the down payment required,” he said. Tommy believes the reason his market hasn’t flooded with foreclosures is because of 2020 forbearance and because home values haven’t declined, saying, “I also see a lot of people who’ve lost jobs or are behind in payments selling their homes because they still have lots of equity and they’re using it to pay off bills and have a nest egg while they rent or reset, so to speak.”

WHY DIVERSIFY?

In 2011 Tommy took the reins of the office’s entirely separate, full-service 5A Rentals & Management company which includes 6-12-month, long-term rentals and manages a total of over 115 properties. He thinks markets will continue to see a rise in rentals as long as there continues to be lack of inventory on the sale side, and that’s not just in his tourist locale. He suggests a rental division would work well anywhere. Why? Because quite simply, “People need shelter. They need some where to lay their heads at night— even if its renting to rebuild credit, or until they know an area better prior to purchasing. They might be between homes or building a home.”

Investopiedia’s 2021 article The 3 Reasons to Invest in Multifamily Real Estate also states, multifamily real estate is a “better investment for investors who wish to take an active role in growing their capital, rather than passively putting their money into a fund managed by someone else.”

MULTIFAMILY EXPLAINED

Just as it sounds, multifamily means a property that can accommodate multiple units for rent in one. The term encompasses everything from a duplex all the way up to high rise apartment complexes, and according to The National Association of REALTOR’s® Economists’ Outlook it’s a trend that’s clearly, pun intended, on the rise.

Published in October 2022 the online article states that U.S. “multifamily construction has made impressive gains during the last couple of years,” suggesting that builders naturally turned to multifamily structures during a time when people were buying homes quicker than they could be built. With Canadian celebrities like Income Property’s Scott McGillivray launching his Keyspire online knowledge platform, and investor events such as The Mulitfamily Conference in Toronto (just one of a myriad that happen across North America), it’s never been easier to learn about this type of investing.

DIVISION DO’S & DON’TS

Whether you’re already investing and it’s time for the next step or just looking to lay a good foundation from the start, Tommy recommends a few important tips and technologies for working a rental division that he’s learned along the way, saying, “You must be careful and strategic in two key areas.”

1. Don’t let sales agents feel second rate. Rentals provide a steady source of revenue that also come with a lot of work. Don’t let it inundate staff and personnel, and make sure your agents know sales are a priority and that they’re a priority.

2. Do ensure your marketing and promotion constantly reminds clients and residents that you’re their source for ALL of their real estate needs.

5A Rentals & Management boasts a six-person team (full-time CPA, receptionist, administrator, showing agent, inspector, and owner relations representative). They also retain an attorney specializing in the Alabama Landlord and Tenant Act, a set of laws that vary from state to province. The division handles everything from background and credit checks to financial payments, quarterly investment inspections, and reputable vender referrals. They streamline everything through property management software such as Buildium and Appfolio, each of which comes with their own pros and cons but are tools Tommy cannot stress enough.

Tommy sees the rental market just like the sales market reminding agents and offices that, “There will always be opportunity for both in every market.” He knows he can’t please everyone, yet this remains his customer service goal in both sectors of the industry; one where there’s serious potential in diversifying.

For a FREE copy of EXIT Realty’s corporate magazine, featuring more news and information like this to help you navigate today’s real estate market text ACHIEVER to 85377 today!

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