Cha-Ching! It’s the first week of the month and it’s time to cash these checks. It’s not always easy, but I love having rentals; especially now when rents are through the roof. The challenge now is to find a property to buy. If you were lucky enough to buy a few properties in recent years, you are probably doing very well, but maybe you could do even better! Here are four ways to further improve your rental portfolio.
Consider renting additional space separately. There is a tremendous advantage in this. Garages come to mind immediately, but I have also rented separate storage sheds and have heard of people renting sections of the lot for horse riding or additional storage.
Now I have a property 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 the garage rental, so it actually increases profits by more than that!
Rent additional items. I’ve heard of rental property owners renting items like televisions, computers, or furniture to increase income. I haven’t done that, but have rented separate washers / dryers. 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 one from a tenant who has moved out, I will 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 could increase your headache, but it will also increase your earnings. If the tenant does not want to rent them, you can offer them for free or you may want to remove them. The last thing you want is the responsibility of making sure the washer and dryer are running without any income for the added hassle.
Bill tenants for utilities. For whatever reason, this was difficult for me. From the beginning they taught me that I, as the owner, had to pay for the water. The argument is that water is the only utility provider that can link your property for non-payment. Although that is true, the tenant still needs to pay for the water. The worst case scenario is that the tenant does not pay and you have to.
In my market, it is becoming more and 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 you will use less. I just got off the phone with Travis in my office about this. He has a triplex that had extremely high water bills. I was having trouble figuring it out and paying that bill every month as the owner. 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 a 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. Your next step will be to start billing each tenant for their water use, increasing your income by another $ 150.
Reduce turnovers. This one may seem obvious, but it is often overlooked. Turnovers can be very expensive. In fact, it is not uncommon for a rotation to ruin a unit’s earnings for two or more years. Cause includes loss of rent, marketing to a new tenant, repairs, and more. Reducing turnover can be tricky. Here are some ideas to help.
Screen tenants – This is the best way to keep turnovers low. Obtaining quality tenants is extremely important and the only way to do that is to properly screen them. Obviously credit and criminal checks are essential, but it’s also a good idea to interview your potential client about why they are moving and why they want to rent to you, call references, make sure they can pay rent and utilities , have a stable drama free lifestyle, take care of your things (look in your car when you find them) and have an emergency contact who will help you if you get into financial trouble.
Smaller Rent Increases – In a hot rental market like the one we’re living in, it’s challenging to keep up with the rate at which rents are increasing. Often times the rent in the area goes up faster than I can raise the rent, which is a very positive thing. The reason this happens to me is that I don’t want to raise the rent more than what 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 a costly rotation. In my opinion, it is much better to work with your tenant with reasonable increases and keep them happy and paying their rent every month.
Maintenance – I just had my maintenance crew go to a rental to unclog a shower drain. I received a bill for the service for $ 125. On the bill it mentioned that he found hair in the drain. Why is it my responsibility to clean a drain that the tenant clogged? Well, the answer is … it isn’t. My contract states that I am not responsible for any clogged drains, so when I received the invoice, I created an invoice that I sent to the tenant with a copy of the contract and a copy of the invoice that I received for the maintenance call. Today I received the check for $ 125 in the mail. Now the tenant is conditioned to take better care of the unit because I do not pay for the problems it creates.
The other thing about maintenance that has worked really well for me is taking care of the items that I am responsible for immediately. I don’t delay at all. When I get a maintenance call, I’ll put my team on it right away. The tenant will usually hear from the person scheduled to fix the problem the same day. This has really helped me keep tenants. Tenants have told me multiple times how much they appreciate that. It is not unusual for a tenant to ask me to rent another place for them when they decide to move out, and it is also not unusual for I hear that a tenant stayed longer than they wanted simply because I took care of them.
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.