Creative Way to Increase Your Cash Flow
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Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
10yI would consult with the tenant and ask some questions;
- How long do you intend to stay with us?
- What services would you like to see in your unit; new paint, carpet, washer dryer, cable, security, new doors, windows, out side lights, alarm
- Let them know you want to improve the apartments
- Negotiate with the tenants, agree on a rent increase to cover the up-grades
- As a bonus, agree not to increase their rent for another 2 years
- A gift of a fat turkeys for the holidays
- An end of year bonus for paying on time
- A gift certificate for something they may like
I consider a tenant a customer, take good care of them and you'll find you will get your rent as agreed.
Remember "late charges" increases your net also.
Be kind and understanding when tenants don't pay on time, listen to their excuses or problems, you may be able to help them.
Tenants are just like us, we all have problems at times, a little leverage, understanding and kindness goes a long way.......they won't forget you.
When we have tenants with financial problems I consul with them, we talk about how to earn extra money (that is usually what the problem is...lack of money).
I suggest different ways they can earn money without a job; if your tenant is handy; painting, plumbing, roofing, fixing cars, teaching a course, bookkeeping. I suggest they pass out flyers promoting their services.
I had a tenant that was able to fix broken windows, I helped him with a flyer, told him to get a nice workmanlike uniform to look professional. He was surprised at how many cracked or broken window there were in the neighborhood. He did well, now when he needs some money he finds work by walking around the neighborhood.
Most all tenant can do something to earn extra money. I suggest they try to earn an extra $50.00 a day doing something. I think if they can earn $50.00 a day, they'd be able earn a $100 a day. (people will pay for these small services if approached right)
I use to give my troubled tenants a book, it was call 500 Ways to Make Money Without a Job. Look it it up.
Maybe there is something the tenant can do for you to cover some of the back rent; painting, removing trash, cutting grass, pushing snow, showing apartments for you, landscaping....etc.
Tenants who help you pay your mortgage are a great asset.....work with them.
Charles
42 Replies
- Willoughby, OH · Member since 2016 · 13 posts · 3 votes10y
Originally posted by @Jeff Gates:
One of my properties is close enough to a busy street. Yet not on that street. The long fence can be seen from the busy street. The fence is concrete. I am now talking with the city about selling signage. If I get the permits, I can increase my revenue by 12%.
Landlord by day, farmer by night! I can dig it :) (no pun intended, haha)
- Willoughby, OH · Member since 2016 · 13 posts · 3 votes10y
Originally posted by @Jeff Gates:
One of my properties is close enough to a busy street. Yet not on that street. The long fence can be seen from the busy street. The fence is concrete. I am now talking with the city about selling signage. If I get the permits, I can increase my revenue by 12%.
Please disregard my last post, lol, hanging signage doesn't make you a farmer. That reply was meant for the guy planing date trees at his rentals a few post back, lol. oops!
- Willoughby, OH · Member since 2016 · 13 posts · 3 votes10y
Originally posted by @Jeff Gates:
One of my homes has a big back yard all lawn. We have a water moratorium in California. This area has very hot weather and the tenants never use the back yard since it is too hot. When I went shopping for a date palm about two years ago they were $2000 each at 12 feet high. They grow about one foot per year. I found babies at Lowes for $17 each about 1 ½ feet tall. So I bought 24 and planted them in the rental homes back yard. In 12 years I will sell them for $2500 each.
Landlord by day, farmer by night! I can dig it :) (no pun intended, haha)
- Investor · Holly Springs, NC · Member since 2016 · 18 posts · 14 votes10y
I make it my top priority to attract the "best" tenants which in my mind means people who pay their rent on time, take decent care of the property, and don't move. Some things I've offered that have resulted in long term, good quality tenants have included a fenced yard, off street parking, and a washer and dryer. For the washer dryer, it says in the lease that I am providing it as a courtesy item, but (unlike other appliances) they are responsible for its maintenance, repair, or replacement. I also allow pets, and those tenants rarely move because it's so hard to find a new place that allows pets, and especially with a fenced yard. Good luck!
- Willoughby, OH · Member since 2016 · 13 posts · 3 votes10y
Ok, so for the sake of adding constructive content to this thread after after looking like a buffoon with my last 3 posts... here goes nothing
(Eliminate PMI, reduce property taxes)
I have a rental that was cash flowing @ $117/month. According to my lender, the property has a LTV of 74% I recently had a real estate agent give me a CMA on the property for unrelated reasons. After she confirmed what I believed it was truly valued at, I will now be getting an official appraisal done by my lender. This will accomplish two very important things. It will drop my LTV down to 54% which will allow me to do away with PMI and also lower my property taxes considerably(of course I will have to ask for the report and submit it to my county auditor who has my property appraised WAY above what its worth..) This will yield an additional $102 to my monthly cash flow almost doubling my net operating income! Definitely worth looking into...
- Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes10y
Originally posted by @Julia Tse:
Hi Sir, I am confused. Your LTV from 74% down to 54% means the value your house increased, how can your property tax lower if the value increased?
Details...geez.
- Willoughby, OH · Member since 2016 · 13 posts · 3 votes10y
Originally posted by @Julia Tse:
Hi Sir, I am confused. Your LTV from 74% down to 54% means the value your house increased, how can your property tax lower if the value increased?
The bank has my property under valued and the county has it over valued. To elaborate on this:
I purchased the home for $56k, after 8 years of principal payments I now owe $42k. The bank currently has the property under valued at 56k. The county has the property over valued at 117k. So by getting an appraisal (assuming they appraise it at the same price my CMA came in at, $82k) I can bring my LTV very close to the minimum of 55% I need to eliminate the PMI. I will also be submitting the same appraisal to my county auditor to help lower the taxes. I calculated I will be saving an extra $102/month by doing this (my PMI is $39/ month and my property is assessed at 35% taxable, $70 per $1000). The appraisal will cost $400 and my lender requires I use their appraiser, but at least I can request a copy of the appraisal and kill two birds by forwarding it to my county auditor...
Pretty cool huh!? My only regret is not disputing the taxes from the get go... 8 years ago. But better late than never I suppose.
- Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes10y
@Jeff Barnard reassessing the property to lower your taxes is definitely a good idea to create more cash flow. Like you said, I bet there are a lot of people who can take advantage of it, but just haven't thought about it. So many ways to fully optimize a property to get the absolute most cash flow out of it.
- Cary, NC · Member since 2015 · 99 posts · 38 votes10y
Originally posted by @Jeff Barnard:
Originally posted by @Julia Tse:
Hi Sir, I am confused. Your LTV from 74% down to 54% means the value your house increased, how can your property tax lower if the value increased?
The bank has my property under valued and the county has it over valued. To elaborate on this:
I purchased the home for $56k, after 8 years of principal payments I now owe $42k. The bank currently has the property under valued at 56k. The county has the property over valued at 117k. So by getting an appraisal (assuming they appraise it at the same price my CMA came in at, $82k) I can bring my LTV very close to the minimum of 55% I need to eliminate the PMI. I will also be submitting the same appraisal to my county auditor to help lower the taxes. I calculated I will be saving an extra $102/month by doing this (my PMI is $39/ month and my property is assessed at 35% taxable, $70 per $1000). The appraisal will cost $400 and my lender requires I use their appraiser, but at least I can request a copy of the appraisal and kill two birds by forwarding it to my county auditor...
Pretty cool huh!? My only regret is not disputing the taxes from the get go... 8 years ago. But better late than never I suppose.
Question. Why would you need a LTV of 55% to eliminate PMI. Every mortgage that I have ever heard of allowed PMI to drop after 75% LTV (maybe 70% on a income property). If you are working with FHA, then in my opinion, I would refinance with a whole different lender. Their APRs are always higher than conventional financing.
- Willoughby, OH · Member since 2016 · 13 posts · 3 votes10y
Originally posted by @Ralph Hunter:
Originally posted by @Jeff Barnard:
Originally posted by @Julia Tse:
Hi Sir, I am confused. Your LTV from 74% down to 54% means the value your house increased, how can your property tax lower if the value increased?
The bank has my property under valued and the county has it over valued. To elaborate on this:
I purchased the home for $56k, after 8 years of principal payments I now owe $42k. The bank currently has the property under valued at 56k. The county has the property over valued at 117k. So by getting an appraisal (assuming they appraise it at the same price my CMA came in at, $82k) I can bring my LTV very close to the minimum of 55% I need to eliminate the PMI. I will also be submitting the same appraisal to my county auditor to help lower the taxes. I calculated I will be saving an extra $102/month by doing this (my PMI is $39/ month and my property is assessed at 35% taxable, $70 per $1000). The appraisal will cost $400 and my lender requires I use their appraiser, but at least I can request a copy of the appraisal and kill two birds by forwarding it to my county auditor...
Pretty cool huh!? My only regret is not disputing the taxes from the get go... 8 years ago. But better late than never I suppose.
Question. Why would you need a LTV of 55% to eliminate PMI. Every mortgage that I have ever heard of allowed PMI to drop after 75% LTV (maybe 70% on a income property). If you are working with FHA, then in my opinion, I would refinance with a whole different lender. Their APRs are always higher than conventional financing.
I would love to refinance but unfortunately I do not have the credit to do so, as I am currently in the process of building a thin credit file, and the family member who the mortgage is assigned to doesn't think they will qualify either. I have tried to convince them to explore the idea but they refuse to apply. It sure would be nice though, as we are currently paying a fixed rate of 7.25%. Im unsure if its a FHA loan or not, but I do know the loan was for investment property initially. I contacted the lender (BB&T) about eliminating the PMI and they told me I would need a LTV of 55% since it was for an investment property. Conversely, they are willing to drop the PMI on owner occupied mortgages at 65%.
- 10yBill ThompsonPro MemberRental Property Investor · Jamaica Plain, MA · Member since 2015 · 60 posts · 88 votes
This has probably been mentioned already but I'm loving my coin-op laundries for extra cash flow. I have the following setup in four of my MF properties that collectively yield between $400 - $500 per month in quarters each month. Operating expenses are very low because I use gas dryers (instead of electric), tankless water heaters for hot water, and high efficiency, front load washers to save water.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes10y
Originally posted by @Al Williamson:
@Max James you're my type of guy.
Yes there are tons of ways to bring in side income. I spent five years rounding up ideas and was eventually able to pay my mortgage with ancillary income (without using my rents).
You're off to a great start. Let me suggest that you also offer payday rent options. Give your tenants the option to pay half their rent every other week (on their paydays). You'll end up with the equivalent of an extra rent payment at the end of 12 months.
Keep on innovating!
I don't know how I missed this in December, but I don't know if I could go with something like this. It's one thing to do the 2 week thing for someone that has a mortgage, because the extra payment goes towards the balance. In this case, the tenant pays an extra 9% or so in rent than they would pay if they were paying monthly. Do they agree to this in the lease?
Skyline Properties - Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes10y
Originally posted by @JD Martin:
Originally posted by @Al Williamson:
@Max James you're my type of guy.
Yes there are tons of ways to bring in side income. I spent five years rounding up ideas and was eventually able to pay my mortgage with ancillary income (without using my rents).
You're off to a great start. Let me suggest that you also offer payday rent options. Give your tenants the option to pay half their rent every other week (on their paydays). You'll end up with the equivalent of an extra rent payment at the end of 12 months.
Keep on innovating!
I don't know how I missed this in December, but I don't know if I could go with something like this. It's one thing to do the 2 week thing for someone that has a mortgage, because the extra payment goes towards the balance. In this case, the tenant pays an extra 9% or so in rent than they would pay if they were paying monthly. Do they agree to this in the lease?
I haven't executed this but offer it to my new residents. Mr landlord said it works great. I can imagine in a C-D class area where living month to month is already incredibly hard, paying an extra little bit to pay rent when they get paid is a wise financial decision for them. If there isn't any control over their spending habits, having the money pulled on their payday is probably a good option. I always clearly do the math for them too so they know how much more they would pay a year.
- Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes10y
Originally posted by @Bill Thompson:
This has probably been mentioned already but I'm loving my coin-op laundries for extra cash flow. I have the following setup in four of my MF properties that collectively yield between $400 - $500 per month in quarters each month. Operating expenses are very low because I use gas dryers (instead of electric), tankless water heaters for hot water, and high efficiency, front load washers to save water.
Nice Bill!
What is your opinion on buying standard electric dryers and lower efficiency washers? I have a 4 Fam and ran the numbers. I could buy a refurbished set of Speed Queens, which are great appliances, for about $550 total. It'll take me about 3 years to get my money back. I'm just worried about the maintenance part. I'm on a lease now where a third party owns them and does all the maintenance. Their repair guys, not sales, always tell me that lots of people will buy them and be unhappy due to the high maintenance cost. Thanks!
- 10yBill ThompsonPro MemberRental Property Investor · Jamaica Plain, MA · Member since 2015 · 60 posts · 88 votes
@Max James: I went the electric dryer / electric water heater / low efficiency washer route with my first laundry. I regret it. My monthly electric bill is so much higher with that setup. I'm not sure if the high cost is due to the electric water heater or electric dryers. Perhaps it's a combination of both.
I purchased my equipment new and have had great luck with repairs. I've had two repair incidents... one cost $60... the other was covered under an extended warranty I purchased. For perspective, that's across 16 appliances (2 washers, 2 dryers per property) purchased over the past 5.5 years. We use whirlpool commercial machines that have proved to be very reliable.
I not sure how you're calculating your payback but I would think a 4 fam would generate at least $100 per month in coins. I have a mix of 2 fams and 3 fams that are doing better than that. I'm not sure what your operating cost would be but surely it would end up under $50 per month. So in theory your cash flow would be $50 per month, which would pay for those refurbished speedqueens within one year. You're right in that the wildcard is repairs.
- Multi-family Investor · Allendale, MI · Member since 2015 · 121 posts · 51 votes10yWe recently handed the cost of trash back to the tenants, even on our four family. It saved us $15 per month per unit. Also shopped around for snow/lawn and shaved another $40 per month. Increased rent by $25 per month on everyone renting that has been there at least 2 years. It all adds up for sure!
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