So I have bought my first 5 plex. And I would like some inspiration on how to improve cash flow. I will, however, try to make the thread as wide as possible, so that many people might find things that they can use. Thus I just want to hear as many suggestions as possible. Here are a few I'm planning to do:
1) Add meters. Not everything is metered in the building. I'm looking to meter everything - warm water, cold water, and electricity.
2) Remove grass. Grass is high maintenance. On the property, there is a small patch of grass that needs mowing 1-2 times a week. I'm planning to remove it and instead place some nice granite gravel, this will improve the overall look and the tenant that now mows it for the price of free electricity, will instead pay for all utilities and I will spray it twice a year with some kind of weed remover.
3) Decrease cleaning. When I took over the property, there were cleaners coming 2x a month for a total price of 800$ a year. I decided not to continue the contract and clean myself for a few months just to get an idea of how long it took and how often it was nassacery. I found that you can decrease the amount of cleaning to 1 time a month and not end up with a pigsty without any problem. Thus I should be able to cut the cleaning bill by 400$
I'm looking at improving storage space and renting it out.
So let me hear how you have cut costs or increased revenue? Did you rent out a parking spot? Installed a new kitchen?
We bought a 3 unit this summer and are slowly renovating it to increase rents as the primary driver of cash flow increase. With full cosmetic renovations in place, we've almost tripled the rents (they started at $550) with new tenants.
We include the water & utilities as the building was set up that way when we bought it. The cost of buying new boilers (forced HW) and updating the radiators in each unit would cost north of $20K so we're simply setting the rents at market rate and then adding the former year's utility bills split among the three units. We figure we're going to be at least coming close with this method without wiping out years of cash flow with separate unit metering. We've also included a clause in the lease stating that going forward, we will adjust rents based on any increases after annual assessments. I feel something like this could save you from spending a ton money you don't need to, however you know your building better than I do!
As far as cleaning, I'm with you on that one...that's excessive. I have each tenant pay for move out cleaning up front so they can leave without deep cleaning the unit. I simply hire a pro to scour the place when they leave.
I definitely understand the tendency to want to optimize the heck out of your new property as we're going through that now. We also keep reminding ourselves it needs to cash flow by spending as little money as we need to...whenever you get an expensive idea, ask yourself if there's a less costly, more creative way to get around it to run your business more efficiently.
Increasing cash flow has restrictions, Obviously transfer costs to tenants, reduce expenses and increase rent. Annual rent increases are mandatory to cover increased expenses.
Limit unnecessary expenses to only those items that will translate into higher rents. It is necessary to spend sometime to reduce expences but all other "improvements" must be paid for by tennats increased rents within reasonable time frame (max two years).
@Joachim Lassen There's only so much you can do with adding amenities or rehabbing. This is because your property is still valued off comps (regardless of if it's over 4 units). At the bare minimum, the market sets the level of service you should provide.
I would start by improving curb appeal followed by interiors. Parking spots are nice but you most tenants expect to get 1 parking spot - so upside might be limited.