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14 Clever Ways to Maximize Revenue From Your Rental Property

Mar 29 2017

 

 

Are you maximizing revenue from your real estate investments? If you have rental property, there are literally hundreds of ways to make extra money. I often thought if I had 20 properties to take care of that it would be a full-time job for someone, possibly me. In addition to the rental income, at a time I was running a small lawn care company, trying to generate enough money to live on. That mowing, plowing and miscellaneous maintenance generated capital to kick-start my seed money for real estate investing. Now that I have my rentals, I always look to save money or generate new revenue streams from my tenants. I am not looking to gouge them, but for ways to leverage my skills and their money.

 

14 Clever Ways to Maximize Revenue From Your Rental Property

1. Manage your own property.

If you can manage your property at all, this is a huge savings. A property manager will get up to 10% of the rents just to take and make calls. You can do that from anywhere in the world as long as you have cell service. You need to be able to take a call and make a call. Save this 10% of gross rents and increase your total profit by as much as 20%+.

2. Do as much maintenance as you can.

If you live close to your property, do as much as your own maintenance as possible. Maintenance shops get $50+ per hour, often over $100 per hour.

Most maintenance items are not rocket science; if you can fix items at your own home, you can fix them in a rental. Just verifying the problem before calling someone to repair it will save quite a bit. Troubleshooting and fixing the small stuff can save thousands.

3. Avoid vacancies.

Filling rentals is one of the most difficult parts of being a landlord. It is much easier than it used to be. The rental market is very strong, and the free online marketing tools are plentiful. Paying $200+ for an ad that runs only a few days is obsolete marketing. Any quality renter will have a way to view online ads.

No one cares more about filling a property than you do. If you live close enough to your rentals, consolidate the effort by showing your place just three times a week. If you live farther, align all the showings about 20 minutes apart, and get your place rented in a day. Make sure all applicants are pre-screened and that they confirm before arriving.

Hiring a property manager to get a tenant will cost you a month’s worth of rent, which is 8.3% of revenues. Then add another 10% a month for their ongoing services.

If you are concerned about finding enough renters, you can always increase demand by lowering price (or increasing marketing). Likely, you will still make more money than using a property manager.

4. Add a coin-operated laundry.

In a multifamily building, you can add coin-operated laundry if you do not already have in-unit laundry facilities. Even if you have built-in apartment sized laundry equipment, you can provide larger machines in a common area for an added price. No tenant wants to load up their laundry and go to a laundromat.

If you have coin-op equipment already, make sure it is working properly. I see many tenants of properties I do not own with coin-op laundry go to a laundromat. That is easy money to get, and makes it better for your tenants. If you have coin-op equipment, be sure to provide a change machine. It’s a lot easier to have bills to take home than a bucket full of quarters. And tenants do not like to beg at the bank or gas station for quarters.

Keep in mind, quality tenants will list in-unit laundry as their top rental amenity. Many will not even consider a rental without in-unit laundry. If you can add laundry in the unit, you can raise rents, get better tenants and faster rentals.

5. Implement pet fees.

Virtually all tenants have a pet (or two+). Adding extra pet rent, such as an additional $25 per animal, can greatly increase revenue. Virtually all rentals charge for pets. I charge $25 and do not have an additional pet deposit. Remember, solid renters control their pets. A great renter will have a great pet.

If you do not allow pets, remember this: Quality renters can go anywhere, but most would rather sleep in the gutter with their pet than the Taj Mahal without it. Many renters would have a difficult decision to make if they could only bring their pets or their kids.

6. Sell partial months.

Typically, when a tenant leaves my rentals, they leave at the end of the month. I have been very successfully with one day turns, but sometimes it doesn’t work out that way. I can often find a great tenant, and their existing lease ends a month later than I like. Here is the solution.

Sell a half month. Offer to prorate the last two weeks of the month. The renter will technically be renting two places for the last half of the month. You will take a two week vacancy rather than a month and not lose the quality renter. You get additional rent, and the renter gets time to move and clean out their old place at a more relaxed pace. They get cheaper moving trucks and should be able to get all of their deposit back from the old place with the extra time for cleaning.

Get the first two weeks of rent, then collect rent on the first. Never collect on anything other than the first of the month. When you have multiple units, it will be impossible to keep track of otherwise.

7. Offer satellite TV.

Give your new renter your satellite TV referral code on their move in or just prior to it (assuming you have satellite TV). I have been successful in getting discounts on my own TV service, and the renter gets a great deal, too. There are ways to make additional money in larger 5+ unit apartments with exclusive provider contacts and reselling the satellite or TV service.

Adding in a “free” wi-fi service will help you get rented and may also be a way to increase rents.

8. Get a real estate license.

If you have tenants, get a real estate license. At some point, if you have good tenants, you can be their realtor. That can put a few dollars in your pocket fairly quickly. Not all your tenants will use you, as everyone knows a realtor. If you can get just a few, it could increase your earnings now, as well as when they send referrals later. I sell homes to my tenants when they leave and offer easy lease terminations and a $500 bonus when they close. Or refer the tenant to a realtor you know and get a referral bonus. Often, you need a real estate license to get a referral.

Factor in built-in discounts when you buy additional property, and you have another cash cow.

9. Make your own keys.

I give one set of keys to every adult. If a set of keys gets lost, it’s $5 per key. All my locks have a Schlage SC-1 keyway, and I use “Do Not Duplicate” key blanks. I purchased my own key maker, and I make my own keys. If I buy a new lock, I can make extra keys without a trip to the locksmith. The key cutter was less than $400, DND blanks are ~.40 each, and I have saved easily more than that. Factoring in the convenience of skipping the trip to the locksmith, and the savings are exponentially better.

You never have to worry about giving up your last key to a renter.

10. Implement lease termination fees.

When a renter wants to break a lease, there is little you can do. You can enforce the lease, or let them go.  Have a lease termination clause in your lease to make the matter plain. I charge two months’ rent for a lease termination. I sometimes lower the amount depending on how long the tenant has lived there. If a tenant is getting moving expense paid by the employer, the employer will consider that part of the cost of moving the tenant.

Of course, if they buy a home through me, there are no lease termination fees.

11. Charge holding fees.

When a renter drops off an application, they need to put money down to hold the unit – assuming they pass the background check. Call it a deposit, and it might have to be refunded. Call it a fee, and it is a sunk cost. You still need to do a background check, but a $1,000 fee will lock in the tenant. If the tenant fails the check, give the money back. If they find a place across town, keep the money. It will save you the expense of a new tenant if the tenant continues to “shop around” after they apply to your place.

12. Collect application fees.

You need to do a background check on all tenants. It costs money; my background checks typically cost me ~$400 or more if the applicant lived outside of my state. It includes credit reports, past landlord checks, employer checks, and county level criminal checks for all states the applicant lived in for the past seven years. I charge $40 to each applicant 18+ for the checks.

13. Enact extra occupant fees.

For some reason, tenants often neglect to tell you about people who will be moving in after they sign the lease. When they move an extra adult into the rental, they have broken the lease. Do a background check on the person, update the lease, and add an additional rent amount for the new occupant. I charge $50 extra.

14. Put in vending machines

I have not yet done this, but I know vending machines in a multi-family property could be a great additional source of revenue. Kids like to spend money on junk, landlords like to get money. It’s a perfect fit. Even a $75 gum-ball machine can make a ton of money. Selling a $0.02 gum-ball for $0.25 is a great profit margin.


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Landlord Knowledge Base

If you’ve ever considered investing in a few rental properties in Philadelphia or Bucks County, PA now might be a good time. Prices are still low in Philadelphia, but have been on the upswing. According to the National Association of Realtors, the median price of an existing home in a US metropolitan area grew 13.7% between July 2012 and July 2013, the latest in a 17-month streak of year-over-year price increases. 

New landlords can choose from properties that are likely to appreciate and a large pool of potential renters.Licensed realtor Pat Mueller cites a few reasons for this trend: “Many families have lost their homes to foreclosure and are entering the rentals market for the first time in years. Mortgages are also harder to get now, so fewer people are qualifying for a new one.”The more skills you bring to the table to get into Houses for Rent in Philadelphia Philadelphia or Bucks County, PA and the more time you have to devote to your properties, the faster you can make a return on your investment. 

But investing in rentals can also be disastrous (or too stressful to be worthwhile) without expertise. Here are three professionals you may consult about your new rental properties, and what you can do to mitigate how much they cost you:Handyman:  You may need to hire a specialist for some work on your rental. If you need new outlets or new pipes, for example, hire an electrician, plumber or licensed contractor. Handymen usually tackle smaller, more manageable tasks, like:

  • Painting and paint removal
  • Drywall repair
  • Minor appliance repairs (fixing a leaky toilet or faucet, among others)
  • Installing tiling or flooring, moldings, windows, doors
  • Refinishing decks, cabinets and other wood items

When You Could Skip It: You could do any (or all) of these projects yourself if you have the time and interest in learning. Of course, this only works if you live relatively close to your rentals and are flexible enough to service them on short notice. And if you’re willing to respond to the occasional 5 AM basement flooding.

Average Savings: Any base rates or costs-per-hour vary from location to location in Philadelphia or Bucks County, PA , but nationally, you can expect to spend an average of $60 to $85 per hour for repair costs. It general costs less to hire an individual handyman than a handyman employed by a company. Expect an additional charge if your job requires a trip to the store for materials.

Resident Property Manager As the owner of a handful of rental properties, you may be able to manage them yourself, but if you want help, a single resident manager would probably be more cost efficient than a property management company. Resident managers may:

  • Serve as a handyman
  • Advertise vacancies in your units
  • Show apartments to prospective tenants
  • Review rental applications
  • Collect rents

When You Could Skip It: Again, the closer you live to your properties and the more spare time you have, the less likely you are to need a manager. The obligations of being a boss will also cut into the time you save on maintenance.

Average Savings: The national median wage for residential managers is just over $25 per hour. Research the wages in your community and adjust according to how much responsibility your manager will take on. 

Real Estate Agent: Once you’ve gotten your financials in order and done your own research on the neighborhood(s) you’re considering, you might contact a realtor to show you potential properties. You can also arrange for a realtor in Philadelphia or Bucks County, PA to show rentals once they’re ready to rent.

When You Could Skip It: It depends. Even if you’re a local, or have thoroughly researched the neighborhood(s) you’re considering, a realtor is a great resource for a first-time rental buyer. Realtors have access to data and statistics not necessarily available to the general public and first-time buyers may not know all the right questions to ask. Using a realtor to fill your Houses for Rent vacancies is less of a no-brainer, depending on your other time commitments or whether you plan to hire a resident manager who could do the same thing.

Average Savings: As a buyer of rental properties, as when buying your own home, sellers typically pay most, if not all, of the buyer’s realtor fees. In this case, Mueller points out there’s little reason not to work with a realtor. For help in filling your units in Philadelphia or Bucks County, PA, the services of a realtor would set you back between 10-20% of the unit’s rent per month.  Mueller recommends interviewing with several brokers before making your final decision to invest into Houses for Rent .

The Bottom Line: As a new landlord, you can’t necessarily control the flexibility of your schedule or the amount (and cost) of unexpected repairs to your properties. Rentals are a long-term investment. However, to maximize profits from your Houses for Rent, new rentals, you can buy close to home and start small. It is best to begin with just one or two properties. This will allow you to maximize the time you spend on your properties’ needs, and minimize the amount you’ll have to pay anyone else.

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