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SHOW NOTES FOR EPISODE #070 – 12 WAYS TO INCREASE YOUR RENTAL PROPERTY CASH FLOW
How do you get more income from your rental properties? Raising the rent seems like the most obvious way to increase cash flow, but in this week’s Fun Fact Friday episode, we came up with 12 more ways to increase your monthly cash flow.
What if you want better cash flow from your rental properties? Yes, you can increase rents but what if they are already at market levels – do you want to risk losing tenants? You can’t just raise the rents arbitrarily. It has to make sense. If tenants leave, income goes down, not up. But if that isn’t an option, what else can you do to increase your monthly cash flow? There are actually a number of ways. We came up with a list of 12 that will increase cashflow with less chance of losing valuable tenants.
- Install coin-operated washing machines. Even if you don’t have the money to do this yourself, you can find a company that will do it for you, and share the income with you.
- Rent extra parking space. You can charge weekly for renter’s extra cars. Or, you can rent out unused spaces to neighboring apartment or office buildings.
- Reduce monthly services expenses by seeking competitive bids on services you already use. Start asking for competitive bids for your common monthly services such as trash pick-up, lawn or landscaping and pest control services, to name a few.
- Rent storage sheds. Especially if your apartments are small, your renters may need a place to store their extra things. Don’t let them spend their money elsewhere. Utilize unused space in your building such as awkward-sized space, unused units or put up a few water-proof sheds on the property.
- Enforce late fees. It is perfectly fair to have a fee for late payment of rent, and guess what? Those who are chronically late usually don’t even mind paying – they just don’t look at these things the same way as others.
- Offer improvements for rent increases. If it’s worth $25 more monthly rent to a tenant to have a window A/C unit, install a dishwasher, or add another inexpensive amenity.
- Install vending machines. If your rental properties are large enough, others will do this for you for free, and give you a share of the income.
- Rent by the room. A three or four-bedroom house or unit might make more money if you include all the utilities and rent by the room. This has made a lot of fortunes for investors in college towns who offer student housing. Some even charge by the bed. It does, however, increase the responsibility of management.
- Rent-to-own sale. If you have a single family home that you’re having trouble renting, this could make sense. Usually there’s a significant non-refundable deposit, and higher than market rents in these deals. When renters change their minds, as they often do, you get to keep the deposit and better cash flow. This is great when poor cash flow makes you want to sell. You either sell or get the better cash flow as you repeat the process. Check out our podcast episodes #029 and #057.
- Search around for less expensive property insurance. Seek competitive bids and look closely at your policy to see if there are adjustments that can be made, such as changing coverage from replacement value to actual cash value. Some insurance companies will give you a bulk rate for many units.
- Re-Finance your mortgage. Since you may have improved your property and built a favorable profitability track record, see if you can get a better interest rate and or terms that can reduce your monthly mortgage payment.
- Institute a RUBS program. A RUBS program, which stands for Ratio Utility Billing System, allocates the property’s actual utility bill to the residents based on an occupant factor, square footage factor, or a combination of both. The advantage of implementing a RUBS program is that it requires no initial capital investment and it will avoid intrusion upon entering each resident’s apartment to install a meter. It also eliminates “owner-paid” utilities.
Well, there’s 12 cashflow increasing options that we came up with — without much thought. Maybe you can think of more. You might want to consider creative approaches like striking a deal with a local cable TV or high speed Internet service company where you get part of the monthly service fee or allow a cell phone company to put a broadcast transmitter on your roof for a monthly fee. And I’m sure there are a lot more.
Reducing expenses and increasing cash flow not only puts more money in your pocket each month but it also increases the equity in your property – thus increasing the overall value of your investment.
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