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by | 07, Nov 2022

1o Ways To Increase Revenue In Your Rental Property

How do you increase the revenue of your rental property?

Well, you could raise the rent… that’s pretty obvious though. In this episode, Dan dives into 10 ways to increase the revenue of your property.

This is a really important question that every operator has to ask themselves. Because you’re not only increasing your cash flow, you’re actually increasing the value of your property.

It’s a win-win situation. Another area people tend to overlook, is cutting expenses. Sometimes the dollar you were looking to make… is actually a dollar you can save. So, what are 10+ ways to increase the revenue of your property?

Find out on this week’s bonus episode of Multifamily Investing Made Simple!

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“It’s not all about the cash flow, here’s the catch… A dollar saved is worth more than a dollar earned.” -Dan Krueger

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** Transcripts

10 Ways To Increase Revenue

[00:00:00] Dan: So you just bought the first property, and the big question is how do you increase your revenue? A lot of new operators get tunnel vision when they get their first property and when they look at trying to increase revenue, they just focus on the rent. There’s a slew of other supplemental income things that you can.

To increase the revenue in your property. So today we’re gonna talk about the top 10 ways that you can increase the revenue at your rental property. Now, the first one on the list is the easiest, so let’s get it outta the way. You can increase your rents on your property from where they’re at to market rent, but that’s not why you’re here.

So let’s get to the good stuff. A lot of people don’t realize that they can charge a premium for shorter term leases. Most everybody wants a 12 month lease, which is great. You don’t have to worry about vacancy in that period. But there’s a lot of people, a lot of residents that might prefer to have a six month term or three month term, or even just go month to month [00:01:00] from the get go.

So you can charge a significant amount more to allow people to do that. So if you have a, a unit that’s renting for a thousand dollars a month and a 12 month lease, and someone wants to just do a six month lease, maybe it’s 1100. And if someone wants to go month to the month, maybe it’s 1200. That’s a significant premium over the 12 month sticker price.

Another great way to increase revenue without increasing the rents is to introduce rub. Which stands for Ratio Utility Billing. This is where you bill back the utility costs of your property to the residents. The most common form of this is to bill back for water usage, but you could technically do it with trash and electric and gas and all that stuff if you really want to.

I wouldn’t suggest feeding your residents to death, but water is one of the biggest expenses in a rental properties, especially. The older value add type of properties that a lot of people are focusing on. Now, this might only be 20 to $30 a month per unit, but that adds up significantly. And it also encourages your residents to be conservative with how much water they’re using.

So it’s win-win for everybody. [00:02:00] And number four on the list is late fees. Most people are charging late fees, but if you’re not, This actually adds up to a decent amount of money. Even if you have a really good tenant base. It’s not uncommon for people to need to pay late from time to time. So if they want the convenience of being able to do that, a lot of times they’re willing to pay, you know, 8% of whatever their rent is to be able to pay on the 15th or something like that.

Now, that’s enough money to incentivize people, not to pay late, but for those people that need to, for whatever reason, that turns into money in your pocket with no expense associated. Another great way to add value to your residents and also add income to your rental property is to provide storage solutions.

Now, you could do this a bunch of different ways, depending on the type of property that you have, but for most value add properties, uh, the common solution is to put some relatively inexpensive storage. I don’t even wanna say lockers, but containers in the basement of a building. Most people will just put up effectively fencing that’s lockable, very inexpensive to install this, but it gives people a place to store their belongings [00:03:00] without cluttering up their apartment, and you can easily charge 20 or 30 bucks a month for this.

Another little bonus to this one is it does incentivize your residents to stay for longer. The more things people have, the more stuff they accumulate, the less likely they are to want. So it’s a sneaky little resonant retention trick as well. Number six on the list is parking. And this is especially valuable if you are in a densely populated urban area.

If you’re in one of those areas, parking is always going to be a premium. And if you have parking onsite at your property, you better be charging for it. I know in our area, in the sea or B minus class, uh, asset class, we can get easily 50 to 60. Maybe even $75 per month for an outdoor parking spot. And if it’s covered parking or any kind of garage, it’s easily a hundred, $150 a month that you can start to get, and that adds up tremendously.

Number seven, on the list, application fees. Most people, especially newer operators, are just gonna charge however much it costs to run a residence application and do the background check. Now, [00:04:00] most places are gonna be able to do that for an operator for maybe 30 to 40. But you can actually charge a little bit more to the resident and get another 10 or $20 of revenue every time somebody applies for a unit.

Now it’s not much, but if you have a decent number of units over time, this adds up substantially. And again, there’s no expense to incorporating this. Number eight is pet fees. And this is one of my favorites because I’m a pet owner and I love my pet, and whenever I was looking for apartments for myself and I clicked that filter that said, Allow pets the amount of results that I.

Went way down and it was discouraging because there’s a lot of people that have pets, and that’s a huge section of the market that you are eliminating from your potential resident base if you don’t allow pets. And it’s a great way to generate additional revenue as well. Most people are gonna be able to charge a one time non-refundable deposit, which is effectively a fee.

Uh, when someone with a pet moves in, now this might be $250 or something like that, and it’s a one time thing, so it’s not much. But you can also charge pet rent and depending on where you are and what [00:05:00] type of property you have, this could be 30 to 40 or even 50 bucks a month, and that adds up. The next one is Coin operated Laundry.

Now, these days you can get card operated machines, but the companies that provide that service are gonna take a decent amount. Of the, of the money in a service fee. So if you wanna keep all the money for yourself, uh, the best thing to do is to own the machines in the building and do the coin collection yourself.

Now they’re gonna get heavy and it’s a pain in the neck, but those things generate a significant amount of income. So if you don’t have a good laundry solution in your building, you should get one. And number 10 is service fees. Now, there’s a lot of things that a resident might need while they’re residing in your building, and if you could provide that for them, it’s another opportunity for you to generate some extra income.

Now, this could be simple stuff like in installing an AC unit. Technically the resident could do this themselves. However, you don’t want them to do it incorrectly, and if you could make, you know, 40, 50 bucks or something, having one of your technicians do it properly, it’s win-win. It’s safer and you get to generate a few extra bucks [00:06:00] for doing.

So those were 10 fantastic ways to add revenue to your property, specifically through supplemental income, because if you increase your income, your NOI is gonna increase and the value of your property is gonna go up, which is fantastic. So it’s not all about the cash flow. But here’s the catch. A dollar saved is worth more than a dollar earned.

Cause every dollar that you earn in revenue, technically you’re earning on margin. There’s operating expenses that you have to factor in. Most properties can operate at a 50% expense ratio, so that means all that income stuff that we just talked about. Technically, you’ll probably keep 50 cents of each dollar, but.

If you save on expenses, that’s gonna go straight to the bottom line. So a dollar saved is a dollar earned. There’s no margin on that. So let’s talk about how you can save on the expense side of your p and l. One of the best ways to keep your operating expenses down on your rental property is to keep your vendors honest.

And I’ve seen this most notably lately with insurance. Insurance on your property is something that can creep up on you if you don’t pay attention. Your policy will probably automatically [00:07:00] renew every year, and you might have gotten a really great deal in the first year, but somewhere around year two or year three, those prices are probably gonna start going up.

So it’s a good idea to re shop your insurance, I’d say once every two to three years to make sure you’re getting the most. Efficient rate possible for your property. Another great way to keep your expenses down, especially on those historic c and b minus class buildings, check for leaks routinely. Now, if you’ve got historic brownstones or mid-century builds, the plumbing is always gonna be one of the biggest expense line items.

On your p and l. So you’ve gotta go around on a regular basis and check the toilets, check the faucets because those leaks can add up. Running toilet can cost you thousands of dollars. It doesn’t sound like it should be that big, but it is. So you’ve gotta have your maintenance techs checking. I’d say at least once a year, if not two to three times a year, going through every unit, checking every faucet, every toilet, cuz those leaks will cost you in the.

And I think one of the best ways to reduce expenses, especially for those new operators out there, [00:08:00] is to really nail the systems on your unit. Turns a lot of people when they’re first starting out, cannot effectively turn a unit quick enough, and their vacancy is inflated and it doesn’t need to be. So if you can get your vendors on board with your systems, get everybody booked ahead of time and take that vacancy time down, it’s gonna have a dramatic impact on your pnl.

So a lot of people might take a full. In between a tenant to get in there, do the work, whatever they need to do, and then get it released. So it might be vacant for a month. Now if you get your systems down effectively, you can get that vac. Time down to about three days, which is substantial. If 30% of units turn in a year, this could be the difference between 7.5% vacancy and 5%.

Now, if you plug that number in on your models, you’ll know that makes a big difference to the cash flow and to the value of your property. Now I know there’s a certain sexiness to increasing revenue and, and increasing that top line, but sometimes all you need to do is reduce your expenses. So really take a look at your business model and the way you’re operating your property.

The money [00:09:00] might already be there. If you like this video and you found it helpful, let us know. Leave a comment, drop a like, and subscribe so you can see more videos where we make real estate investing and.

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