How much does a real estate agent make on a rental? If you’re wondering this, you’re in the right place. I used to be a licensed agent, so I know a thing or two about leasing rentals. Read on to learn all you need to know.
Disclaimer: The information included in this post is for informational purposes only and should not be taken as legal, financial, or DIY advice. We highly suggest consulting a professional before attempting any DIY home improvements or repairs.
The Short Answer
The quick answer to this question is that it depends. Factors including the rental rate of a unit, the location of the listing, how the commission is determined, and whether the real estate agent has to split the payout.
However, it can be anywhere from a quarter or half to a full month’s rent. If you lease a house with a monthly rent of $1,700, you’ll earn either $425, $850, or $1,700. If you’re also the property manager, expect to earn around 8% (the national average) of the gross monthly rent as a management fee.
How Much Money Do Agents Make on Rentals?
While there is no one-size-fits-all answer to this question, I’ll break down all the information you need to know to give you an idea about how real estate agents earn money on a rental.
1. How Commission Is Determined
There are a few different ways a real estate agent can earn commission on a rental. Before finding a tenant, the listing agent enters into an agreement (aka the management contract) with either the leasing company or the landlord.
These contracts determine the amount an agent will earn for filling the vacancy on behalf of the property owner. This amount varies depending on the method used. In some areas, certain approaches are more common than in others. The agent might choose a flat finder’s fee, a percentage of the annual rent, or a portion of the monthly rent.
A rental unit’s monthly rent rate determines some of the more common commission agreements. That means, upon signing the lease, the real estate agent receives the first month’s rent. They might also receive a portion of the rent. This is known in the industry as an “occupancy fee.”
For example, if the listing is a home that rents for $2,000 a month and the agent’s contract states they will receive half of the first month’s rent, they walk away with $1,000.
We should note here, however, that an entire month’s rent is the most commonly used method of compensation in the United States, so the agent would likely be entitled to a total of $2,000 in commission.
Monthly Management Fee
Another way of determining how much a real estate agent makes on a rental is by percentage (known as the management fee). The percentage often ranges from 2.5%-15%, but in some markets it can go even higher.
This percentage amount could be anything, but 8% is a standard number used in many contracts. Typically, as rents and unit counts increase, management fees decrease.
With this method, a home renting for $2,000 per month has a yearly rate of $24,000. Using the 8% example, the total annual commission for this property would be $1,920.
The average rental price for a three-bedroom home in 2020 was $2,017. Since there are more three-bedroom homes in the United States than any other type, a real estate agent has the potential to earn a lot of money managing and leasing properties.
2. Splitting Commissions
In some cases, several parties involved in the lease agreement might split the commission earned from a rental unit. That means the total commission the real estate agent actually takes home is less than the amount in the rental contract.
- The agent might have another agent to split the commission with if there is a listing agent and a tenant agent. In this case, it is often a 50/50 split.
- In other scenarios, the agent might work for a broker and agree to split commissions with them. The split can be anywhere from 20%-50%. So on a listing with the $1,200 commission used in our previous example, the real estate agent might take home only $600-$960.
- There are also times when an agent has to divide the commission between another agent and a broker. Under these circumstances, the rental commission received will be even less, with half going to the other agent and 20%-50% paid out to the broker.
We have to point out that terms vary by each contract, and what is standard in one area might not be standard in another. Sometimes it is not an even split between agents. It could be 75/25 between the listing agent and the tenant agent.
Don’t worry, we won’t make you do any more math! The amount really just depends on the agreements made between the various parties involved in the leasing process.
3. Who Pays the Commission?
Just like the question of how much, who pays it changes from contract to contract. In some areas, the tenant simply writes their first month’s rent check out to the listing agent instead of the property manager or landlord.
In others, the landlord pays the agent directly. The listing agent is usually responsible for paying the tenant’s agent or broker. Regardless of who pays the fee, the end result is the same: the real estate agent involved in the listing or locating of a rental unit receives the commission check when the lease is signed.
It’s an upfront payment, unlike real estate sales, where the agent is paid their commission upon the property’s closing, which can sometimes be well after the date of the sale.
4. Geography Matters
When determining the amount you will get paid for finding a tenant to lease a property, you have to consider the rental’s location. Commission methods and amounts vary depending on the area.
For example, the fee will be lower in areas where units are more abundant than tenants ‒ often 25% or 50% of the monthly rent. In larger, crowded cities such as New York, the fees can skyrocket.
The difference in rent between smaller communities and larger cities is the number of tenants looking for homes and the number of homes available.
In big cities, more potential tenants seek rentals in a market with fewer options, so they are more likely to enlist the help of a real estate agent. In these crowded markets, the tenants are usually responsible for paying the fees to the agent.
Frequently Asked Questions
Do You Pay a Realtor When Renting?
The answer to this is not so simple. As explained above, this is reliant on the type of rental market in which you reside. Ultimately, choosing whether or not to use a real estate agent when searching for a new home is your decision. If you don’t use an agent, the landlord pays the fee to the management company or leasing agent.
What Percentage Do Rental Agents Take?
The percentages vary. It can be anywhere from 25% to 100% or even more of the monthly rental rate as an occupancy, or finder’s fee. If they’re also the property manager, expect them to earn 4% to 8% of the gross monthly revenue.
What Are the Duties of a Rental Agent?
A rental agent, also called a leasing agent, has to meet with possible tenants to show them the property or properties, settle on lease terms, collect any security deposits, and work with the property owner to fulfill the lease.
Can You Make Good Money as a Leasing Agent?
Working hard and focusing on high-rent properties with generous commission terms opens the door to making serious money. However, the average salary for a leasing agent is $38,154 per year without a license and $45,990 per year with an agent’s license.
If you’re considering getting a real estate license, there are several other ways to use it to make money. Some real estate agents take a “jack-of-all-trades” approach, working with home sales and rental services, as well as other aspects of the realty world such as appraisals.
So, How Much Do Real Estate Agents Make on Rentals?
With all factors considered — the area the listing is in, the contract’s terms, whether or not the real estate agent must split their commission with another agent or broker, and the cost of rent for the house or apartment — the answer still widely varies.
If you’re a real estate agent wondering what kind of commission you should charge to fill a rental, take a look at which commission model is typical in your area. You might choose to go with a flat fee, a portion or the entirety of the first month’s rent, or a percentage of the yearly rent.
Take into consideration whether or not you will be responsible for paying out a portion of this commission to another agent or your broker. Overall, the most common agreement for a leasing agent is to receive one full month’s rent upon lease signing.
Instead, they might get a percentage of the annual rental cost ‒ ranging from 2.5%-15% (in some cases even higher). An exact number is impossible to provide since monthly rent varies depending on the size of the unit, the unit’s location, and the availability of homes in that particular market.