The Power of Leases
with Keith Hairrington
For internal use only
Keith Harrington of KW Pasadena hosted an informative workshop about navigating lease transactions for realtors. He emphasized that despite common apprehension, leases present a significant opportunity in today’s market. Due to high home prices and interest rates, more people are opting to rent, and these renters often have substantial incomes. Keith highlighted that leases allow agents to build their database, establish new relationships, and potentially convert renters into future buyers. He shared a personal story of a New York couple who rented through him, then later returned to purchase a home.
Keith stressed, that leases offer, excellent practice for newer agents to learn their area, master real estate documents, and enhance communication skills. Additionally, he noted that while the commissions on leases may not seem life-changing, consistency in closing lease deals could result in significant earnings. Leases also offer opportunities to build relationships with other realtors and receive valuable client referrals.
Keith closed by reminding agents to educate clients upfront about rental criteria and to manage expectations around compensation, compliance, and tenant screenings. His advice reinforced the idea that engaging in leases can be a long-term play with lasting benefits for realtors.
Take Aways
Maximize efficiency with group showings
Keith recommends organizing group showings instead of individual appointments. This approach allows you to connect with multiple interested parties at once, making the most of your time and ensuring those who are truly interested can attend.
Streamline transactions with separate checks
For smooth compliance, request tenants provide three separate checks—one for the commission, one for the landlord deposit, and one for the rent. This ensures a clear and straightforward process, avoiding any administrative delays.
Embrace the potential of lease opportunities
Leases may offer more than just immediate income. They open doors to new relationships, generate valuable referrals, and can lead to significant future business, as demonstrated by Keith’s success story of turning a lease into a $5.2 million sale.
Leases are a long-term play
While leases may not provide immediate large commissions, they are valuable for building relationships. Renters can turn into buyers in the future, and leases often lead to valuable referrals over time.
Know the local rental market and tenant qualifications
Be familiar with the credit score and income requirements in your area. For example, Pasadena generally requires a 620 or higher credit score and some listings even demand a 700+ score or higher income multiples. Setting realistic expectations with tenants upfront is key.
Be prepared for compliance requirements
Make sure you understand and follow the compliance rules for leases, including submitting the right forms, ensuring the landlord's contact information is included on the lease, and following the three-check rule to avoid any delays in receiving your commission.
FAQs
Here are the FAQs from Keith Harrington’s lease workshop:
Why should I do leases if I’m not focused on rentals?
Leases allow you to build relationships, grow your database, and gain referrals. Renters often turn into buyers, and leases are a great way to meet people with significant incomes.
How is compensation for leases typically structured?
Compensation is usually based on a percentage of the first year’s rent, often around 6%, but all commissions are negotiable.
Is it worth doing leases if the compensation isn’t high?
While lease commissions might not seem significant individually, handling multiple leases can lead to substantial earnings over time.
What is the “three check rule” for leases?
Tenants must provide three separate checks: one for commission to Keller Williams, one for the other brokerage, and one for the landlord (for rent or deposit). This prevents compliance issues.
How do I submit lease documentation for compliance?
Submit only the applicable forms, focusing on those highlighted as required. Ensure the landlord’s name, address, and phone number are listed on the lease to avoid file rejection.
Do renters really turn into buyers?
Yes, Keith shared examples of renters who later bought homes, proving that leases can lead to future business.
How do I handle flaky tenants during showings?
Keith suggests scheduling group showings instead of individual appointments to save time and avoid no-shows.
What credit score do tenants need to rent in Pasadena?
Typically, tenants need at least a 620 credit score, and in some cases, a 700+ score may be is required by the landlord.
How should I handle clients with pets or low budgets?
Be transparent that pets may limit rental options and may have fewer rentals available for low budgets in that area.
Do I need to use RentSpree for background checks?
Keith prefers opting for a more hands-on approach to collecting and reviewing tenant applications. However, he recommends landlords conduct background checks themselves.
How do I get compensated if a listing isn’t on the MLS?
Keith advises having an upfront conversation with clients, explaining that there may be properties where the agent cannot get paid, and the client could persue the opportunity on their own.
How should I approach clients interested in listings on Zillow or similar sites?
Keith advises being upfront with clients that some listings on platforms like Zillow may not offer compensation for agents, and the clients may need to handle those rentals independently.
