9 Ways To Squeeze More Money Out Of Your Rentals.
“Here Are A List Of Things That You Could Do To Make More Money From Your Properties”
By Van Sturgeon
Real Estate Investor
When I was growing up in Chicago, I lived in an apartment building that my parents were able to scrap enough money together to buy as an investment. I have always loved apartment buildings, and I prefer these suckers over any other investment that you can think of.
Give me an apartment building, and you can keep your Google and Apple stock. I know that at the beginning of every month, the champagne bottles are uncorked and the caviar is dropped on some ice to chill, as I watch the rent payments come strolling in from all of my investments.
Oh...How sweet it is on the first of the month...every month...as a landlord of apartment buildings...to collect those rent payments
Apartment buildings or multi-family commercial real estate is the best investment because the building is valued based on its income. It is often much easier to finance a purchase of a multi-family because banks look at the property to qualify the mortgage, rather than just your personal income.
Simply put...the more money your property generates, the more valuable it becomes. The value is not based on comparable sold properties in your area like smaller residential deals are. It is purely based on the amount of income and profit that it generates.
I knew that you were going to love apartment buildings, too!
So...it behooves us as landlords to figure out ways to increase the amount of money our buildings are producing, because they will give us more profit and it will increase their value. Here are some strategies that I have used to unlock additional value out of my buildings, and you can too:
- Adding laundry facilities.
As a kid growing up, I remember my dad opening up the coin box on the old washer and dryer that we had in our apartment building. Boy...it was fun to see all of those shiny quarters in that box and they all belonged to us!
By adding a common area laundry room to your property, you can earn additional income every time your tenants wash and dry their clothes. If you had a 10, 20, or 30 unit building and each tenant was doing their laundry once or twice per week, you could see how this would quickly add up.
Trust me...If you have a 4 unit building or higher, you should get yourself a washer and dryer, and figure out where to stick those suckers on your property, because they can make you a lot of money.
CASH!!!
Additionally, having an on-site laundry will allow you to keep your tenants longer, because it is a pain in the a-- to carrying your dirty clothes down to the laundromat. Happy tenants means longer staying tenants, which in turn means that you have lowered your biggest expense...tenant turnover.
- Adding separate hydrometers.
I remember buying an apartment building in Toronto, where electricity was included in the total rental payment each month. As I was walking around the exterior of the building on a nice, hot summer day, I couldn’t help noticing that the tenant had all of their windows open and the air conditioning on.
I told my superintendent to make a bee line over to that apartment, and get those windows closed, or the air conditioner turned off. After about 15 minutes, my superintendent came back to tell me that the tenant was not going to do either. The tenant felt that it was important to get in fresh air, while at the same time, have the air conditioner on working to cool the apartment. The cost of the electrical use was included as a part of their rental payment each month…
So...Take a hike!
I hate buildings that include all of the utilities in the rental payment, because there is no accountability by the tenant. By adding separate gas, water or electrical meters to each rental unit, you can now make the tenants pay for their fair share of the use, and reduce the expenses significantly.
Not all municipalities will allow you to add meters to every single utility, but it is worth an attempt to get those changes made. Trust me...This one change can increase your cash flow and property value tremendously.
- Parking & storage space.
There was a 12 unit apartment building that I had purchased in Miami that had a basement that was completely empty, except for a laundry facility in the corner. As soon as I bought that sucker, I had two additional apartments built in the area and installed storage lockers for tenants to rent at $20 a month.
Huge money maker…
These are the things that you need to look for when you are evaluating property. I just dramatically increase the cash flow of the property and the value of the building, all at the same time by just one move.
Another opportunity is with parking spaces. Tenants can and will pay more for their own reserved parking spots and/or garage. Also, you can simply add security cameras and an electronic gate, and justify an increase in the monthly parking fees.
Remember...The more amenities that you can offer your tenant, the better it will be for tenant turnover and your cash flow.
- Vending machines.
By adding a vending machine to your common area entrance and/or laundry room, you can set yourself apart from other buildings in your area and once again bring in more income simply by providing more services to your tenants.
- Led lighting.
I bought a beautiful 48 unit apartment building in Chicago in 2006, and the previous landlord was using 60 watt incandescent light bulbs throughout the building. Before we started a retrofit program, I counted 124 light bulbs that were turned on all day, every day and including Sunday.
A quick, back of the envelope kind of calculation, gave me that this apartment building would chew through about $230.00 each day.
$230.00 each day for a bunch of light bulbs...Can you imagine that?
If you are investing for the long-term then led lighting is a great option for you to consider, as it uses a lot less energy and helps you save on your utilities.
Additionally the bulbs will last a lot longer, so you do not have to pay your maintenance guys to change them out. You save on energy and labor, now that's a win-win!
- Pet rent.
30 years ago, pet rent never existed in the places that I had properties. Nowadays, there are certain rental markets where it is the norm and acceptable to charge a fee for a pet.
Leave it to the capitalist system to find new ways to make money!
My properties have always been pet friendly, but sometimes these pets can cause more wear and tear on the property and the yard. Check your local municipality, as you may want and/or be allowed to charge an additional fee to your tenants that have pets.
- Cable company kickbacks.
If you own a large multi-family building, you may be able to sign an exclusive deal with the local cable provider in your area and receive some cash back when your tenants sign up to use their services.
I have used this strategy in the past, and I'd suggest you look into this with your local cable and internet providers.
8. Renegotiating your expenses.
I see that many new real estate investors tend to always focus more on making money, but it is equally as important to work on reducing your expenses.
Actually...this is the easiest thing that you can do right away, it won’t cost you a dime.
When you own real estate investing properties you will need many service providers and therefore have a lot of expenses. These expenses could be the following:
- Lawn maintenance and snow removal
- Interior cleaning of common area hallways I'm laundry room
- General maintenance providers
- Security
- Garbage removal
- and elevator service, just to name a few…
I would suggest that the first thing that you should do is call around in your area, and get multiple quotes for each of the services that your property uses. I can guarantee that you will be able to lower your expenses over the course of a year, and maybe even be able to save thousands of dollars.
9. Smart renovations.
The renovations that I am talking about in this section are the renovations done to the common areas and individual units of the building.
When you renovate the interior of your units you can command a higher rent,
and when you improve your curb appeal and common areas you will attract more tenants to your building.
Obviously, kitchens and bathrooms are the renovations that add the most value in the individual apartments, but I would argue that curb appeal is the number one way to increase the value of your property.
How will anyone know or care that you have a renovated kitchen or bathroom in your rental property, if your property looks horrible on the outside? Curb appeal is a very important factor in the decision making process for everyone, because you could have an amazing kitchen and bathroom in your building, but if nobody is willing to go in and take a look, who cares.
Well, there you have it. You now have a number of ways to increase your cash flow and the value of your property.
For more information on house renovations and real estate investing, visit www.vansturgeon.com to help you in your real estate investment journey.