4 easy ways to increase profits and rents
Cha Ching! It’s the first week of the month and time to cash these checks. It’s not always easy, but I love having rentals; especially now that rents are through the roof. The challenge now is to find a property to buy. If you’ve been lucky enough to acquire a few properties in the past few years, chances are you’re doing great, but maybe you could be doing even better! Here are four ways to make it even better in your rental portfolio.
Please consider renting additional space separately. There are a huge number of advantages to this. Garages immediately come to mind, but I have also rented separate storage sheds and heard of people renting out sections of the lot for horse housing or additional storage.
I have a property now that I rent the garage separately. It’s a two-car garage that I rent for $200 a month. This strategy increases my income by 10% and there is little to no expense with renting the garage, so it actually increases profits by more than that!
Rent additional items. I have heard of rental property owners renting out items like televisions, computers, or furniture to increase income. I haven’t done that, but I have rented washers/dryers separately. Washers and dryers tend to break down, so I will never include them in my rental units. If I buy a property with a washer/dryer or get it from a tenant who has moved out, I usually offer it to the tenant for free or rent it to them. Obviously, renting the washer and dryer will increase your monthly cash flow, but you will be responsible if something goes wrong. It might increase your headache, but it will also increase your profits. If the tenant does not want to rent them to you, you can offer them for free or you will want to take them away. The last thing you want is the responsibility of making sure your washer and dryer are working without any additional hassle income.
Bill tenants for utilities. For some reason, this was difficult for me. I was taught from the beginning that I, as the owner, had to pay for the water. The argument is that water is the only utility provider that can bind your property for non-payment. While that is true, it still makes the tenant pay for the water. The worst case is that the tenant does not pay and you have to pay.
In my market, it’s becoming more acceptable to ask the tenant to pay for all utilities, so why not give them what they expect? The two benefits are an increase in cash flow for you and they will use less. I just talked to Travis in my office about this. He has a triplex that had extremely high water bills. He was having trouble solving it and paying that bill every month as a landlord. This was cutting his earnings by over $300 a month!! The solution for him was to pay a company $2,500 to install a system to individually measure each of the 3 units. Within a month, he discovered that one unit was responsible for most of the water use and discovered that they were growing marijuana. Those tenants were asked to leave and were replaced by a much better tenant who saved Travis over $150 a month. His next step will be to start billing each tenant for their water usage, which will increase his income by another $150.
Reduce rotations. This one may seem obvious, but it is often overlooked. Turnovers can be very expensive. In fact, it’s not uncommon for a turnover to ruin your earnings on a unit for two or more years. The cause includes loss of rent, marketing for a new tenant, repairs, and more. Reducing rotation can be tricky. Here are some ideas to help.
screen supporters – This is the best way to keep turnovers low. Getting quality tenants is extremely important, and the only way to do that is to select them properly. Obviously credit and criminal checks are essential, but it’s also a good idea to interview your prospect about why they’re moving and why they want to rent from you, ask for references, make sure they can afford rent and utility payments, have a stable drama. free lifestyle, take care of your things (look in your car when you meet them) and have an emergency contact to help you if you have financial problems.
Smaller Rent Increases – In a hot rental market like we are in, it is a challenge to keep up with rising rents. Often the rent in the area goes up faster than I can go up, which is a very positive thing. The reason this is happening to me is that I don’t want to raise the rent more than a tenant can afford. My experience is that if the tenant can’t afford the rent increase, they won’t tell you. They will try to make it work and eventually fall behind, creating costly turnover. It’s much better, in my opinion, to work with your tenant on reasonable raises and keep them happy and paying their rent each month.
Maintenance – I just had my maintenance team go to a rental to unclog the shower drain. I received a bill for the service of $125. It mentioned on the bill that you found hair in the drain. Why is it my responsibility to clean a drain that a tenant has clogged? Well, the answer is… it’s not. My lease states that I am not responsible for any clogged drains, so when I received the bill I created a bill that I sent to the tenant with a copy of the lease and a copy of the bill I received for the maintenance call. I just got the $125 check in the mail today. Now the tenant is conditioned to take better care of the unit because I am not paying for the problems they create.
The other thing about maintenance that has worked very well for me is taking care of items that I am responsible for right away. I’m not late at all. When I get a maintenance call, I will have my team take care of it right away. The tenant will normally hear from the person scheduled to fix the problem the same day. This has really helped me keep tenants. I have had tenants tell me multiple times how much they appreciate it. It’s not uncommon for a tenant to ask me to rent him another place when he decides to move, and it’s also not uncommon for me to hear that a tenant stayed longer than he wanted simply because I took care of him.
As I mentioned, buying rentals is challenging right now, so this is the perfect time to work on increasing profits on your current portfolio. This will help you exponentially in the future as you find additional properties.