As I mentioned in the last blog entry, looking for an apartment online was difficult. One of the reasons was rental agents. In fact, it turned out that no matter how we went about looking, the rental agents ironically made it difficult. It turns out that this is all part of their plan.
Rental agencies make money in all sorts of sly ways. But the most visible to the would-be renters is that they charge an entire month’s rent simply for telling you about the apartment. From the renter’s perspective, they don’t add any more value than that. They can’t even show you the apartment at more convenient times because the owner always needs to be there anyway. So you literally pay them for the privilege of knowing that apartment is available.
Now you may be thinking, why would anyone go to a rental agent if they could just connect to the owner directly? This was our thinking all along.
Well it turns out the rental companies handle this first by giving the owners every incentive to sign on with their service. The obvious benefit is that the owners now have a representative who shares the same goal…getting the highest possible price. Other benefits include not having to post your own phone number publicly, not handling the back and forth with prospective renters, reaching a wider market, and getting assistance with legal contracts. Even though you still have to show up for showings and to sign the contract, some annoyance is avoided. And the best part of it all is that all of this service can often be yours for no extra cost because the renter pays for it.
For the business plan to work though, rental agencies really have to make sure that prospective renters cannot find owners in other ways. In other words, they have to do everything they possibly can to coerce owners to sign with them, which in turn forces renters to use their service for lack of other options.
So to bring it back to searching for apartments online (which I talked about last blog), it turns out that it is not just prospective renters watching the listings. Rental agencies are also scouring them literally every second looking for new owners to represent. Then those agencies cold call the owners and literally “harass them” (as one owner we talked to put it).
To give you a sense of how cutthroat the rental industry is, here is an example. Tian found an apartment we were interested in that was posted by the owner online. She quickly called them up and we set up a time to meet. When we showed up, an agent with another perspective renter came in behind us. We toured the apartment for five minutes and decided to go for it. As soon as we walked back out to tell her, the owner told us the agent had struck a deal with her. In a period of five minutes, even though we had technically gotten there first, the agent had made the pitch, delivered a customer, and made a month’s worth of rent off of him.
In the end, as time was getting thin and as apartment prices were trending upward with every passing day, we decided to go through an agent. But we went through an individual rather than a company, which ended up being good. While we didn’t explicitly pay for a monthly fee, we are confident that it was just included as part of the monthly rent and that the owner paid it. Ultimately though, we were quite happy with the apartment we found. More on that later…