11 Ways To Make Extra Money On Your Rental Property
If you've been following this blog for awhile you'll know how important income streams are to me. Aside from having multiple income streams from different businesses, another thing that is important is to know about all of the different income streams that can come from a single property.
Once you know what additional income opportunities are available, you'll start focusing your acquisitions on properties that have multiple income opportunities in addition to the number of rental units.
In this post I will share all of the opportunities that exist for rental properties. Some you may already use, others you may have never thought of before. Not all options work in all areas or all markets, but any that you can take advantage of are great!
Increase the rental rates to just below fair market value
Keeping vacancies low is one of the most important things you can do for your rental property. On the flip side, keeping the rents too low will have you leaving money on the table. I've found that doing rental increases while keeping the rental rate $50-$75 per month below fair market rent makes it a win for the tenant and a win for me.
Want to learn more about what fair market rent is for your property? Check out this post on the topic.
Charge a flat fee for utilities
For multi-family properties that have shared utility meters charging a flat fee is the easiest way to get compensated for the bill. Rather than increase the rent and include utilities, I charge fair market rent plus a $50-$75 utility payment to the rent. I've never had a tenant complain about doing it this way, and it's much easier than having to review the monthly bill and go back to the tenants to split with a different amount each month.
Charge Pet Rent
Pet rent is something I started doing about a year ago. While many landlords do not accept pets (for very good reasons) the reality is that over 30% of households own pets and most tenants who have pets take good care of them. To create a win-win I still charge a refundable pet deposit ($300 per cat and $500 per dog) and I charge a $25 per pet per month pet rent. This covers any extra damage that might be caused by the pet. The extra income helps too.
There are exclusions when it comes to service animals and companion animals. Be sure to understand the laws on this.
Make sure you are taking all of your tax deductions
While I highly recommend anyone who owns rental properties to utilise a CPA, I do think it is important to know the tax deductions that are available to landlords. Here are a list of typical deductions that may be taken (be sure to consult your CPA for individual tax advice).
- Advertising expenses
- Legal & professional fees
- Management expenses
- Repairs/maintenance & cleaning
- HOA Dues
- Office expenses
- Mortgage Interest
- Loan points amortization - including refinances
Review IRS Publication 527 (because they are so fun to read) for more info
Charge for shed storage
When I see storage space that is detached from a building, I immediately consider that rentable storage space. My Greenwood, IN property has a detached shed strategically placed in the middle of the backyard which one tenants rents out for an extra $35 per month. It requires no maintenance and the tenant was happy to get extra storage.
Rent out detached garages separately
Detached garages are even better then sheds, especially when they open to an alley. In Everett, WA we have several older houses with detached garages that are accessed via the alley. There is a ton of front parking so the tenants are not affected much. A landlord will almost always get more from renting the house separate from the garage than they will from renting out both to the same tenant.
I've helped several investor clients purchase properties with detached garages and the average rate seems to be $250-$300 per single car and $400-$500 for a two car garage. The bigger the garage the better!
Try Airbnb or VRBO
As Airbnb and VRBO have gained popularity, more and more travellers are using these websites to find short term housing and housing while on vacation. Owning vacation rentals is a goal of mine, and picking the right area seems to be more important than the right property because modifications are easier than changing locations.
In some big cities like San Francisco, Anaheim and Seattle there are not enough long term rentals because owners are choosing to use Airbnb/VRBO instead and in some cases are earning double or triple what they would with a long term tenant.
If you are wanting to learn more about how to run a vacation rental business check out How to create an Airbnb Empire without owning a home or Mastering Airbnb is also a fantastic course that I've taken!
Do your own Property Management
I had been investing for 10 years before I ever hired a property manager, and the only reason I hired one was because the property was out of state. That first property management company ended up costing me $5,400 in lost rent, not to mention the random expenses that popped up in a short period of time. That was a much needed lesson, and now I really believe we can manage our properties from out of state and will be doing that next year.
The rest of our portfolio is local and takes very little time each month. Everything is systematized and easy to manage and maintain. I also have several clients who self manage 10+ units like it's nothing, and they work full time!
So if you aren't feeling the love from your property manager or are just getting started with one property I say you give it a try and if you have issues you can always hire one later.
Consider offering a lease to buy program
Back in 2007 when I was just getting started in real estate, I took my first investing class which was taught by Wendy Patton. She had some 100+ houses that she acquired using lease options, and she lease optioned those back to renters. It was a brilliant plan and she has published several books, including my personal favorite [easyazon_link identifier="047171836X" locale="US" tag="beadles2017-20"]Investing in Real Estate With Lease Options and "Subject-To" Deals : Powerful Strategies for Getting More When You Sell, and Paying Less When You Buy[/easyazon_link].
Definitely check out Wendy's website at wendypatton.com and read her book for more info, but I can share that she is able to get hundreds more per month in rent and it's something that you should consider yourself.
Build a billboard or sell an easement to a billboard company
I can't remember what year it was, but I once found myself at some real estate investing education event and the topic came up about investing in billboards. The topic was one that I hadn't heard much about, and since I see billboards on a daily basis it really had me thinking how does one go about investing in billboards? What do they cost and how much do you earn?
About 6 months later an opportunity presented itself where a half burned single family home (foreclosure) hit the market for a bargain price of $25k. It also happened to come with a giant billboard on the side. I did some research and found out that the previous owner had sold the rights to the billboard for 8 years for $50k, and that each side of the billboard was paying $2,000 per month. There was 5 years left on the lease (which would have been this year) before the new property owner could either resell the rights or sell ad space themselves.
I was headed out of town so I asked an agent in my office to write a cash offer for me, he did and the bank verbally accepted but needed some changes. I hadn't checked my email all weekend thinking the bank wouldn't get back to us until Monday, and since they didn't hear back they went with another buyer. I drive by that property at least once a week and think of all of that cash flow I missed out on and have yet to find another billboard opportunity since.
Moral of the story, if you ever find an opportunity to buy a property with a billboard, do it! If you happen to own a property with the right zoning, you should seriously check to see what it would take to get a billboard permit.
For more info about billboard investing and building check out www.obuniversity.com
Lease to a cell phone tower company
We all want great cell phone service and fast internet, but no one want to see those ugly cell phone towers, let alone have one on your property. Now what if I said you could earn six figures by giving a several year lease for allowing a cellphone tower on your property, would you be more interested? Sure you would!
Here are a few websites that go into detail about what criteria is needed