A realtor gets paid for apartment rentals based on either a percentage of the annual rent or one month’s rent. A realtor or real estate professional can draft a contract as per the agreement discussed with the property owner.
The commission method used by the realtor for rental listings can be discussed and agreed on between parties. The following are the two common ways realtors get paid for apartment rentals:
Realtors Charge a Percentage of Annual Rent
A few landlords and realtors agree that a percentage of the annual rent may be a fair commission method. In this case, the real estate agent would write the contract so that the landlord pays a pre-set percentage of the annual rent value.
For example, if a home is being rented for $3,200 per month in Richmond Hill; the annual rental value is $38,400. A realtor may agree that they want 10% of the yearly rent. In our case, upon successful leasing – the realtor is paid $3,840 plus taxes. If there are two real estate agents involved in the deal – the commissions will likely be split in half.
Nowadays, realtors are finding ways to minimize the likelihood of another agent bringing a tenant. It’s why you’ll see many rental listings in Facebook Marketplace, Kijiji, Craigslist and local classifieds for rental listings – posted by the realtor.
It’s a great way to get in front of the tenant market and get paid for it.
Realtor’s Charge One Month’s Rent
The majority of Canadian realtors prefer to charge one month’s rent as the finder’s fee for leasing your apartment. Most landlords prefer that their realtors get paid for apartment rentals with one month’s rent.
Under this commission method, the brokerage trust account will hold the tenant’s rental security deposit and first month’s rent. Once the lease is finalized, the landlord is paid their security deposit and any balance owing after commissions.
In the previous Richmond Hill example, the realtor’s rental commission would be $3,200 plus taxes. Again, if two realtors are involved, the commissions will be split.
Lease Extension Clause
In some areas, a real estate agent can add a lease extension clause. In this case, every time a tenant renews their lease – a small pre-discussed commission on the rent is sent to the brokerage. However, this is not all that common. As a landlord, you can negotiate and drop this clause.
Why Do Realtors Help Tenants Find Rentals?
For a realtor in Ontario, showing a rental property is not as lucrative as showing a house for sale. So, why do they do it? Some realtors prefer to niche down and manage multiple rental listings at scale. When a realtor can lease out 3-5 rental listings every month – they can earn on average $12,000 a month. Not too bad, right?
In effect, most realtors will agree to show listings to a tenant looking to rent – because, one day, that tenant will hopefully be a buyer. When that time comes around, the realtor will be looking to close the deal.
A realtor is always aiming to build relationships – that’s the kind of business they are in. A realtor builds relationships daily, with hopes that they can one day sell a property to them. The great people in this field don’t worry too much about how much commission a realtor makes on a rental property. As long as a new client is added to their portfolio – that is one more potential lead.
Advantages of Using a Realtor to Find a Rental Apartment
In a rental market where rental apartments, condo rentals, and homes for rent are at an all-time low – a realtor can be a great advantage. Today, most upscale and renovated rental apartments are snatched up within days of being listed. In fact, a few properties have waiting lists of potential tenants looking to move into the building.
A realtor can help with notifying you of a new rental listing. They can help you negotiate the rent. You might be wondering if people actually negotiate the rent. The answer is yes.
To be honest, some landlords are renting their units for over asking. Yes! Tenants are offering more than the asking lease price.
A recent December 2020 report published by PadMapper with data from PadMapper Research Data shows the following rental prices across Canada:
Looking for an affordable home to rent can be tough, so a realtor can definitely ease this process for you. In some cases, we’ve seen tenants lease places without physically seeing them. These are common for newly renovated spaces and newly built homes.
A real estate agent can help with confirming a property’s owner, ensuring you are renting the owner’s space.
There have been situations where tenants have rented the home to other tenants. According to a report by CBC, a Toronto resident rented homes in the GTA and re-rented those homes to other individuals. He has since been charged.
A realtor can help tenants and landlords make honest, valid deals in a flourishing market.
Can You Negotiate Rent with a Realtor?
Yes, you can negotiate rent with a realtor. You can negotiate rent before signing a lease, or before renewing a lease with or without a realtor.
A realtor is typically not available during the renewal of your lease – but you can always consult with your agent. Your real estate agent is a source of knowledge and information. It’s always recommended to communicate with them when you have questions.
In every province and state, there are rules regarding the maximum rent increase for 2021. Your landlord will generally follow these rules, but it is your job to do some due diligence. For example, the Ontario residential rent increase provides information regarding the following:
- Maximum allowed rent increase in Ontario
- Current 1-year rent freeze in Ontario due to COVID-19
- Exceptions to the rental increase guidelines
In Quebec, the rental increases are controlled by the Tribunal administratif du logement. Regardless of the province or state, you are in, a local realtor will be able to provide some assistance for you.