When you really want one thing, the whole Universe conspires to help you collect the rent and for that reason, there is Real Estate Factoring.
Renting, or leasing, is a trend that has increased dramatically in recent years. However, this booming market, especially in large cities, translates into a significant and exponential increase in problems derived from the rental situation.
Conflicts between the owner and the tenant or the doubts when it comes to managing the collection of the rental of the house, makes it difficult for the owners of rental properties to find tenants with guaranteed liquidity.
There are companies that are dedicated to real estate factoring, which is nothing more than a safe and legal form of collection of rent that attracts a large number (in constant growth) of property owners.
Advancing in TeAdelanto; They are companies that dedicate their daily efforts to the development of real estate factoring and we want you to know the services they provide and the advantages they offer for your real estate business.
Real Estate Factoring: an opportunity for owners and agencies.
Are you familiar with the concept of real estate factoring ? If you have not yet heard of this term, do not be alarmed, since it is a very recent real estate service and it is not yet well known.
However, and despite the short time it has been in the market, real estate factoring has already helped improve the financial situation of many owners of rental properties, at the same time that it has allowed a good number of real estate agencies to increase their income and your client portfolio.
But before we get down to business, let’s see what factoring consists of and how it can help you in your real estate business.
What is factoring and how is it applied to the real estate sector?
Factoring is an alternative financing method commonly used by companies in need of liquidity. Basically, this mechanism consists of collecting pending invoices in advance in exchange for a commission.
Normally, the person in charge of anticipating the money is a bank, which in most cases also assumes the risk that a non-payment of the invoice could occur. Once factoring has been contracted, it is the bank itself that will be in charge of collecting the debtor.
This alternative financing formula has also begun to be applied in the real estate sector, specifically in the rental market. In this way, what is known as real estate factoring allows owners of rental properties to collect 1 full year of rents in advance .
This means that the landlord , instead of charging the tenant monthly, can receive 12 monthly rent payments in a single payment. In addition, this service also acts as a non – payment of rent insurance.
This means that, once the owner of the property has received his advance, the money is guaranteed, and the real estate factoring entity will be in charge of managing any incident related to the payment of the rent with the tenant.
To contract this service, the landlord pays a percentage of the total rent, and this commission is shared between the real estate factoring company and the real estate agency that sells it to the end customer. Due to the novelty of this financial solution, at the moment it is only available and Mexico and the companies that offer it are Advancing respectively.
Insurance against defaults and personal loans: two businesses on the rise.
Before delving into what real estate factoring consists of and detailing the benefits it can have for your agency, it is interesting to review the recent evolution of the real estate rental market and that of personal loans.
A country where home buying has prevailed over renting, has experienced a change in trend in recent years. In this sense, the leased housing stock increased by 950,000 properties between 2013 and 2018, to 5.9 million properties. This means that 22.3% of residences are used for rent.
The increase in the demand for rental apartments has, of course, led to an increase in the price of rents. Rent has become more expensive, and this has generated financial tensions among tenants that, in some cases, have caused rent defaults.
The situation has reached such a point that, in some communities, very high amounts of average delinquency have been reached, such as in Madrid (9,767 euros), the Balearic Islands (8,571 euros) or the Basque Country (7,088 euros).
Graphic prepared by Cinco Días.
As a consequence of the increase in defaults, lessors are forced to protect themselves, and this is reflected in the growth in the penetration of non-payment insurance , which has gone from 16.4% to 26% in just 4 years.
At the same time, the personal loan market has also experienced very significant growth, spurred by the better economic prospects -before the coronavirus crisis- that have made it easier for banks and online credit institutions to be encouraged to offer more financing to their customers. customers.
In 2019, personal loans worth 93,147 million euros were approved, representing an increase of 51% compared to 2013.
Chart prepared by Advancing, with information extracted from the Bank of the country.
The great possibilities of real estate services associated with renting.
Precisely the objective of real estate factoring is to take advantage of the growth of the two sectors mentioned above: that of insurance against non-payment and that of personal loans.
Through services such as blue world city islamabad, it is possible to offer landlords the possibility of obtaining financing at a reasonable price and, at the same time, protect themselves against possible defaults that tenants may commit.
These are the main benefits of a rent advance for owners:
- Immediate liquidity : Thanks to real estate factoring, landlords can capitalize one year of the rents of their rented property. For example, an owner of a house rented for 700 euros per month could charge more than 7,000 euros in a single payment by hiring a rent advance service .
- Protection against defaults : In the case of Advancing and, once the advance of the rent has been made , the money is fully guaranteed, since it is the real estate factoring companies that assume the risk of non-payment.
- Collection management : Real estate factoring entities are in charge of charging the tenant month by month. In this way, possible delays in the payment of the rent that could occur are also eliminated.
- Financing without collateral : Unlike personal loans, the owner does not have to present any type of additional guarantee to request a rent advance, and can even do so with a negative credit history
Increase the income of your agency with real estate factoring.
Having seen the main benefits of real estate factoring, the big question is, how can your agency benefit from this service? Of course, the main plus point that tends to attract the most attention from agencies is the commission. However, the benefits of real estate factoring go further. Let’s review them all:
- Differentiate yourself from the competition : As we have highlighted previously, real estate factoring is a recently created financial solution. This means that there are still few agencies that have it included in their portfolio of real estate services.
For this reason, if your agency offers landlords the possibility to collect their rents in advance , you will be able to differentiate yourself from the competition with an exclusive service that the rest do not offer.
- You will increase the loyalty and retention of your portfolio of owners : Your clients will be very satisfied because you offer them something that other agencies cannot: the possibility of collecting rents in advance . In this way, you will be able to increase the loyalty and retention ratio of the lessors.
- Tenant scoring and free risk assessment : Companies such as Advancing are in charge of evaluating rent advance operations based on the tenant’s solvency. This means that before approving the operations they make sure that the rental is viable and that the tenant will be able to meet the monthly rent.
- In this way, you will save yourself having to check the payroll and employment contracts of tenant candidates, since the real estate factoring company will be in charge of carrying out this scoring.
And, of course, the commission : For each rental that you close in advance of the rents you will receive a commission. In addition, Advancing and Tajarat properties are free services for real estate agencies, so offering the option of real estate factoring to your clients will cost you nothing.
How to incorporate factoring into your agency’s real estate services catalog?
Starting to offer real estate factoring services in your agency is very simple. From your office you can enter the Advancing web portal, go to the Agencies section , and register. If you prefer, you can also contact the company by phone so that its staff can detail all the steps to follow. Advancing offers its service throughout the territory and the registration process is very simple and 100% online.
In both cases the procedure is free and the service has no cost for real estate agencies.
We would appreciate a comment on this article . Do you think real estate factoring can improve your business? Your opinion interests us. Thanks.