4 Steps to Reduce Your Rental Property Expenses by $100 per Month

4 Steps to Reduce Your Rental Property Expenses by $100 per Month

3 min read
Al Williamson

Al Williamson is a former civil engineer with over 24 years of experience investing in real estate, including single family, multifamily, house flipping, commercial, and short-term rental properties. He’s a nationally recognized authority on short-term rentals and has been featured on many podcasts and numerous real estate conventions and REIAs since 2014.

Experience
Al worked as a professional engineer while he purchased and self-managed a small rental portfolio. His goal was to replace his engineering salary, but he got side-tracked.

Al discovered that making money without purpose was unfulfilling. So, he decided that he would only prosper to the extent he helped others. That’s how he ended up assisting an inner-city neighborhood to get back on its feet.

Al learned that landlords could provide leadership as an investment strategy. He talks about this at length on BiggerPockets Podcast episode #8 and in his first book Building Wealth with Inner City Rentals.

After Al’s neighborhood became one of the hippest places in Sacramento, Calif., he switched his focus. He realized that the majority of landlords were not collecting the cash flow they expected. In fact, most were barely breaking even before taxes. So, Al went on a five-year quest to collect ancillary income ideas to supplement his rental income. He publicly documented his journey to pay the monthly mortgage of his eight-unit apartment complex with new revenue streams that didn’t include rents.

Al accomplished this mission in 2015 and placed his findings in his book 40 Ways to Increase the Net Income of Your Rental Properties. Through writing 40 Ways, Al realized that the traditional rental business model was the least profitable way to operate a rental. This insight led him to switch his holdings into a short-term rental mode.

Upon further refinement, he optimized his operation to extended stay rentals (stay of 30+ days), because that business model yielded the same high net income with a lower hassle factor.

Al’s journey resulted in him replacing his engineering salary with income from his extended stay rentals. He “retired” at the age of 50.

Now Al coaches others through his training program, Extended Stays for Landlords, and enjoys inventing new ways for landlords to increase their income and reduce expenses.

Education
In 1989, Al Williamson graduated from the University of California – Davis with a B.S. in Civil Engineering. In 1994, Al graduated with an M.S. in Civil Engineering from the University of Illinois – Champaign-Urbana.

Follow
Instagram @Leading_Landlord
YouTube
Al’s blog LeadingLandlord.com

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In case you haven’t heard about the $100 Expense Reduction Challenge, let me bring you up to speed. In March 2013, I dared BiggerPockets Nation to reduce their rental property expenses by $100 per month. If anyone was successful, I’d send them a $20 Home Depot gift card.

Deborah B. crushed the challenge saving $261.78 per month by adjusting her rental insurance and now I get to join her in the winner’s circle!

A Journey to Finding $100 in Monthly Savings 

It’s a hodgepodge of methods, but here’s how I finally pieced my savings together:

$30 per month by asking tenants to voluntarily contribute $10 each month towards the complimentary Wi-Fi I was providing. Three tenants began adding $10 onto their rent payments. I plan to make a donation request once a year.

$22 per month by having Ambit Energy credit monthly referral bonuses. I referred 15 customers to Ambit’s less expensive natural gas service so now Ambit credits my natural gas bill each month. How cool is that?! My official results are pending, but I’ll post a copy of my bill once it comes in.

$50 per month by buying deeply discounted Home Depot store credits from people on Craigslist. Once I noticed I was spending over $150 each month at Home Depot, I decided to take advantage of the secondary market for gift cards and store credits. I have enough contacts now that I can consistently buy store credits at 30% + discounts and I maintain a reserve of discounted cards so I never run out.  Farwell Home Depot financing!

$70 per month by reducing my vacancy rate. Just because I’ve been a landlord since 1996 doesn’t mean I do everything well. One of my biggest mistakes was waiting for a tenant to move out before marketing their unit. Now I start marketing as soon as I get a 30-day move out notice. I conservatively predict that this practice (plus the waiting list I’m forming) will reduce my vacancy rate by at least 25% which saves $70 per month in lost rent.

That’s $172 worth of savings; definitely enough to win the $100 Expense Reduction Challenge.

How much can you save? It’s not easy but it is a worthy quest. A lot of my BiggerPockets mentors consider saving $100 to be equivalent to owning profitable rental unit. But since $100 worth of savings can be realized without investing any money, your return on investment can be off the charts!

Motivated yet?

Create Your Own Success Story 

Here’s a battle plan to get you started:

Step 1: Park Your Ego  

There is no way around it; a serious effort to cut cost involves self-confrontation. And that’s not fun! Egos have their place, but not when it comes to reducing expenses.  You can either save face or money, but you can’t do both at the same time.

  • Think of areas where you can be more diligent with your property management practices
  • Examine yourself for areas where you’ve been complacent

Step 2: Confront the Brutal Facts 

  • Make a bar graph of your annual expenses by vendor
  • Sort expenses from greatest to least
  • Repeat for multiple years. Five years of trends would be ideal
  • Look for trends. What’s been a reoccurring theme?
  • Look for “perfect storms” that have occurred more than once
  • Quantify the cost of your less than ideal management practices

Step 3: Challenge Every “Fixed” Expense (They Really Don’t Exist)

Just like a schoolyard bully, fixed expenses start to crumble once you fight back. Be irreverent – you get what you negotiate.

  • Ask if there’s a crazy way or a silly way to reduce this expense
  • Ask for contributions from everyone who benefits from an expenditure (even non-tenants)
  • Figure out how to get the same result in a different, less expensive way – there are many ways to the top of this mountain
  • Refuse to accept a vendor’s annual rate increase

Step 4: Be Courageous – Be Ruthless – Take Action

  • Try out your expense reducing ideas on a small scale and measure the results
  • Attempt to negotiate concessions on your top expenses.
  • Be bold! Ask for help. Ask for donations.
  • Be unreasonable and make the world adjust to you.

Get Into the Corridor

I love T. Harv Eker’s saying, “get into the corridor.” Get into the corridor and start moving toward your goal. Only then will you be able to see inside rooms that contain previously obscured opportunities.

It’s normal to be scared and dismiss this as a cute idea. After all, who wants to risk looking foolish or facing possible failure?

I understand those reactions. I’ve wrestled with them all year.  If it weren’t for public accountability, I might have given up.

You Can Do This! 

Wring out your full potential. The benefits can go far beyond real estate investing and possibly make you a more disciplined person.

I’ll look for you in the Expense Reduction winner’s circle, but until then, let me leave you with these words:

“Whether you think you can or think you can’t – you’re right.”  – Henry Ford

Photo: ericcommando89