Investor · Fort Wayne, IN · Member since 2011 · 27 posts · 6 votes
Hello. I am looking for ideas to bring in more cash from my rental properties. Have any of you had any success at offering services that your tenants want or charging fees for anything aside from the typical late fee or making new keys, etc...?
Tim,
I would suggest adding value to get more money, not nickel and dining them to death. One thing I used to do is buy new appliances and charge them an extra 150 per month, but if they paid on time for an entire year, they could take them with them when they left. I would make money on the sale plus it got them to pay on time.
I got tired of watching the tenants all run to rent a center!
A few quick things I did this past year or saw in my market:
1. Fight property tax values. I contacted the assessor and got a few of my properties re-assessed and I paid lower property taxes. This added a nice bump to my full year cash flow.
2. Increase rent. I didn't bump the rent up, I gave two of my tenants an option, either take care of the lawn and keep the rent the same or I would have to raise the rent by" X" amount. Two of them agreed to take over the lawn care, saved me a $120 a month.
3. Rent extra space. One of my properties had HUGE backyard (you could literally fit another house back there). I divided the backyard with a fence and a lock. I rent the back yard space (behind the fence) to my cousin, he parks his RV there for $15 a month.
4. Rent appliances - if you are filling a new unit, offer to include the fridge, parking space, storage, etc. for an additional monthly fee. An investor in my market does this with his SFH buy renting out a washer and dryer for $20 extra a month.
5. Doggie rent - charge a fee for pets, per month (in addition to a deposit, if your market allows).
One of my rental properties has a two car detached garage. I rented the garage out separately to a car collector for $200 per month. I gave the house tenant first right of refusal. They decided to park in the street. I put an ad in CraigsList and was flooded with calls. I offered a slight discount for a full years payment up front. Easy $$$$!
Tim,
I would suggest adding value to get more money, not nickel and dining them to death. One thing I used to do is buy new appliances and charge them an extra 150 per month, but if they paid on time for an entire year, they could take them with them when they left. I would make money on the sale plus it got them to pay on time.
I got tired of watching the tenants all run to rent a center!
There certainly has to be a balance between "milking" a property and finding ways to add value.
I've also heard of splitting lawn care with the tenant. Not as great as having them take it over but great if they aren't handling it well or if you are covering that cost for your property.
If you are going to go down the "path to ownership program". Do a little digging on "lease/options". I've never done one (haven't been investing long enough), but a couple of guys in my market do this to also increase yearly cash flow.
I fully support lease/options and installment sales. As they help defer gain and split it up over time; however, you could also use a 1031 exchange to defer gain.
One thing I used to do is buy new appliances and charge them an extra 150 per month, but if they paid on time for an entire year, they could take them with them when they left. I would make money on the sale plus it got them to pay on time.
I got tired of watching the tenants all run to rent a center!
Rob,
How did you go about offering this? Did you mention it as an option to tenants when you were showing the property? Did most of your tenants move and take the appliances after one year, or did they stay longer?
Maybe a boring comment, but I think that by carefully screening tenants, you can reduce turnover, reducing expenses tremendously and therefore increasing your profit. You don't have to invest any money to do that.
I'd have to run the numbers, but something tells me the payback period on building a new garage would be something like...a really long time.
Also, many tenants will be tenants forever. I think buy and hold is better than owner finance for long term investing. So, if you do a lease option, the main upside (if you believe buy and hold is better than financing) is hoping they don't exercise the option to buy and you keep the option money. In the mean time they are being gouged for higher rent. I personally don't want to pre-arrange an adversarial relationship just to get a couple thousand more dollars. But there are many advantages to dong L/Os. They are functionally illegal where I live. Make sure to study up. There is a book called "buy Low, Rent High, Sell High" or something like that which is a pretty good roadmap discussing the structural aspects of L/Os. I would pay the extra money to get a lawyer to make the contracts.
... I was thinking about putting up a garage on one of my properties with alley access and a large back yard. I am curious how you would work out the utilities, though, in that there is only one meter that would be shared between my house tenant and the garage one.
...
In the state of PA, the utilities in this case would be the owner's responsibility! In PA, if not separately metered, the owner cannot place any part of a shared utility bill upon the tenant.
You're already putting some money into constructing the garage, might as well get it to have a separate electric service.
... I think that by carefully screening tenants, you can reduce turnover, ...
OK, so you got a wonderful tenant with a great job that was thoroughly screened up front; now, after being in your unit a bit that tenant finds a new job in another state. Still had a turnover, despite screening. You can only control eviction as a cause of the turnover this way; the choices a tenant might make (job change, getting married or divorced, having kids and needing more space, etc) are still beyond your control and some of those choices will give you turnover.
... I think that by carefully screening tenants, you can reduce turnover, ...
OK, so you got a wonderful tenant with a great job that was thoroughly screened up front; now, after being in your unit a bit that tenant finds a new job in another state. Still had a turnover, despite screening. You can only control eviction as a cause of the turnover this way; the choices a tenant might make (job change, getting married or divorced, having kids and needing more space, etc) are still beyond your control and some of those choices will give you turnover.
These circumstances don't make careful screening any less valid a way to optimize profitibilty whether it be due to turnover, property damage, time spent collecting late rent, etc. there is no point in investing a bunch of cash or leverage to maximize rents if you are not adhering to landlording 101.
I've only been doing this 18 months or so, but I can share what I've learned so far.
Definitely protest property taxes if you have grounds. I saved over $1000/yr on one property this way. It was a breeze. I didn't need to hire anyone, just spent 20 minutes at the tax office explaining my case (based on the price I purchased it for, and the inspection report), and it was done. That was definitely one of the most profitable 20 minutes of my life!
If you have a good tenant, don't be too much of a softie, but make sure you look after them. Don't nickle and dime them to death, and if something is broken, fix it promptly. A good tenant that pays on time every month, doesn't trash the property, and settles down for a while, is worth their weight in gold.
Shop around when looking for insurance and such. The difference between making 2-3 calls and 5-10 calls, can easily be another $500/yr.
Keep notes on every company you use (and ask around before doing so whenever possible). The sooner you're able to settle in on the keepers the better. For example, a handyman that's prompt, reliable, doesn't overcharge, and is respectful to the tenants is a big asset to your business.
If you have a vacancy that's dragging on, be honest with yourself and be decisive in fixing what's causing the problem. I say this having done the opposite and learned my lesson! If the asking rent is too high, don't wait two months, drop it a bit, wait two more months, drop it a bit more, etc. Figure out what it needs to be, and bite the bullet. If there are things about the property that are turning people off, figure out what they are and address them.