Increasing Revenue As a Landlord
January 24, 2023
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A Landlord’s Guide To Increasing Revenue
When it comes down to it, the success of any business revolves around revenue. You must generate income to stay in business.
In the rental industry, there are many ways to do this.
And knowledge is power, especially when you’re trying to make more money.
Increasing revenue can be done in more ways than just increasing rent prices.
In this article, we’re going to review several methods to increase revenue and sustain your rental business.
Increasing Rent Price
Let’s start with the simplest method: Increasing the rent price. Instead of arbitrarily raising the rent, though, be sure to do your research and understand the market.
Getting an informed view of your rental market takes good intuition mixed with diligent research. If you’ve been in your market for a while, you may know what most landlords charge and what most renters are willing to pay. If not, you’ll want to connect with folks in the area and use the internet to further your research. The right questions and applied research can provide valuable insight and better equip you to increase rent reasonably.
Creating a tier list will help you identify pricing ceilings. To understand rental prices and how much you can charge, think of your market as a series of pricing tiers. Once you’ve organized your data, analyze the spread in price, and group properties by their price per square foot. You must create these groups based on pricing alone. There will be some outliers – a landlord who has way overpriced their dilapidated property or others who could increase their rent – but by collecting a substantial amount of data and zeroing in on price, you’ll find the market tends to balance itself in aggregate.
Thus, you’ll find that the bottom tier consists of run-down properties that are not managed well, or those whose owners have not updated their pricing since they first purchased their property. In the top tier, you’ll find well-managed properties with the latest amenities that typically are newly updated.
Once you have collected a useful amount of data, it’s time to take a hard look at your property’s fit in the market. If you discover that your rental price is at the top of a pricing tier (a “ceiling”), then it’s probable that the only way for you to raise that price is to improve your property. Look at the group of properties one or two tiers above you. You’ll probably notice patterns like off-street parking, in-unit washers and dryers, or fitness areas. You’ll probably notice how the amenities and improvements impact their rental price. This will allow you to estimate how much effort and money it would require to offer the same. High ROI improvements should be targeted first.
The list will likely be unique to your market, so it’s not easy to give specific insight. Still, a handful of improvements, like renovating bathrooms and updating lighting fixtures, tend to be universal in their appeal and increase property value.
Adding high-tech features can also justify increasing rent for your property. Features like programmable thermostats, smart lighting, high-tech locks, and online rent collection can make your property much more appealing to prospective tenants while allowing you to raise the rent price. It’s a win-win.
Reducing Tenant Turnover
Another great way to increase revenue is by reducing tenant turnover. It does not only kill cash flow, but the time and turnover costs associated with preparing a property for a new occupant makes it the most substantial expense a landlord must face. Here are five ways to lower tenant turnover:
- Find Great Tenants. Having one communicative, reliable tenant who stays in your apartment for years will cost you significantly less than multiple unreliable tenants who only stay for one year at a time. A thorough screening process will help you find the right tenants.
- Upgrade Your Property. Even though there are upfront costs associated with this, you will quickly be able to increase rent to compensate. And you will attract better tenants. So, it’s worth considering additions like a fitness center or extra parking.
- Curate Discounts. Putting discount books together for new tenants — or even pre-existing tenants looking to renew — is a way to show your tenants how much you care. You can research and curate different discounts offered by local businesses or buy a coupon book made for your region.
- Collect Rent Online. Paying online is quicker, simpler, and more convenient than sending checks or cash. Allowing tenants to pay online will make their lives easier and act as an incentive for lease renewals.
- Remember Special Dates. Remembering birthdays, anniversaries, and holidays is a smart way to show tenants you care. A text or a small gift can carry a lot of weight. Going out of your way to do this gives a human touch to your business and makes you memorable in a good way.
By using the methods mentioned above, you’ll be able to retain good, long term tenants, while also minimizing your vacancy times.
- Pet Fees and Rent. Allowing pets can put you at risk for greater liability and damage to your property; however, the potential profit should overwhelm those concerns. Deposits, rent, and fees are various types of pet charges you can use. Pet deposits are similar to security deposits, which are refunded as long as no damage occurs during the lease. Pet rent is a monthly charge that is added to the tenant’s rent. Lastly, pet fees are usually one-time fees due when the tenant first brings a pet to the property. We typically recommend pet rent out of these options. It is money that you keep, and it will likely bring you more profit than a one-time fee.
- Late Payment Fees. The success of your business relies on timely payments. Late fees incentivize tenants to pay on time and in full. We recommend implementing a grace period to allow for flexibility in extenuating circumstances.
- Applicant Fees. Landlords sometimes charge these small fees whenever someone wants to apply for tenancy at their property. These fees are a great option because there aren’t upfront costs, they don’t require much time, and they help you find the best tenants.
- Lease Termination Fees. Despite leases being legally binding, it’s never a sure thing that a tenant will stay for the whole lease term. Therefore, lease termination fees are wise because they help minimize lost profit when a tenant has to break the agreement.
- Extra Occupant Fees. When someone brings an extra person to share your property, you are often within your rights to charge extra for that occupancy. Make sure you’re in line with The Fair Housing Act, and then figure out a fair price.
- Landscaping Fees. If you require tenants to maintain a lawn and do similar yardwork, offering landscaping services is often a great way to bring in some extra revenue and take a burden off your renters. If you decide to make landscaping fees a requirement, however, be sure to make that crystal clear in the lease agreement.
- Holding Fees. Few things are more frustrating than a prospective tenant backing out of signing the lease at the last second. A good way to prevent this from happening is by charging holding fees. If someone passes a background check but backs out of the signing, you can keep the holding fees.
Adding Revenue Streams
Rent shouldn’t be your only source of profit, amenities and other revenue streams also help a ton. There are other great ways to increase revenue within your real estate business. Let’s look at some of those excellent options below:
- Cleaning services are an excellent value-add for most landlords, particularly those managing large units and college housing. Offering cleaning services packaged into leases can be a useful selling point for students and their parents. Furthermore, regular cleaning has an additional benefit of better maintaining your properties.
- Renting storage space is a great way to increase revenue. If you have extra space, you could maximize profit by renting it out. Since you already have the room, it won’t take too much time and has the potential to yield worthwhile profit. Landlords can rent out garages, sheds, partially finished basements, and uncovered parking spots.
Be aware, though, that renting out your excess space means additional liability. Be extremely clear with your guidelines for usage of the area and keep consistent with maintenance. Furthermore, there is also a chance that renting to non-tenants could lead to conflict between the storage space renters and existing tenants. It all comes back to establishing clear guidelines to minimize potential issues.
- Offering satellite or cable TV could be a good option for another revenue stream. It’s easy to sign up, and landlords managing five or more units often receive package discounts for selling to tenants. That said, even landlords managing a single unit can benefit from this revenue stream.
Spectrum, AT&T, Comcast, Dish, and Verizon are all available choices when it comes to cable. We recommend shopping around, inquiring about package discounts, and researching prices before making a final choice.
- Letting tenants sublet through Airbnb may be a revenue stream to consider. This is a particularly appealing move for landlords located in areas that experience heavier traffic from visitors and tourists.
The innkeeper model shows the relationship that you would have with your tenant if you allow Airbnb. As the landlord, you would handle the financial end of things. This includes navigating the Airbnb interface, splitting the profit with your tenant, and any other financial aspects of the agreement. Your tenant, on the other hand, is the innkeeper. They would help renters with their bags, provide them with needed information, and see to any housekeeping responsibilities.
In this model, the tenant pays their rent per usual, you get payments from the Airbnb renter, and then you cut a check for your tenant every time they host a renter. This is good because it still keeps you in control of the finances.
- Offering corporate housing involves landlords renting out fully furnished apartments or homes to businesses. The businesses use the space to house traveling workers who are usually away for 20 or more days. Typically, all utilities are included in the bill. It’s essentially an all-inclusive hotel, just without the housekeeping.
Corporate housing works for construction workers or c-suite executives. Regardless of your location, the size of your real estate business, or how upscale your units are, corporate housing could be a great option for you to increase revenue. The major drawback to think about is the cost and time required to fully furnish the space, but it may still be worth it once you crunch the numbers.
- Monetizing extra land is an option for an additional revenue stream. This typically works better for landlords in rural areas, but it isn’t a requirement. The land could be used for livestock, fruit-bearing trees, shade trees, beekeeping, gardens, and more. When deciding the best way to use the land, you should consider what the available space is best suited for, applicable laws, how it will impact your current tenants, and what would offer the most profit.
- Leasing a billboard is something most landlords should consider when it comes to additional revenue streams. While zoning laws need to be considered, you likely already have room to sell advertisement space to nearby businesses, event promoters, and non-profits. Your fencing, siding, roof (particularly if you’re close to an airport), tree line, spacious front yard, and porch railings all can allow for renting out ad space.
- Leasing a cellphone tower is only a good option to increase revenue for certain landlords. Not every landlord will have the space needed for a cellphone tower, and many landlords don’t live where service providers are hoping to build new towers. However, if you meet both criteria, leasing a cellphone tower can turn a hefty profit.
- Offering coin-operated laundry could make sense for you. Renters often prefer this to leaving the building, so it could help you turn an extra profit.
- Installing vending machines is a solid option for an additional revenue stream if you have more than four units on your property. Who doesn’t love to chow down on the occasional snack food?
- Renting U-hauls and trailers is an excellent alternative to increase revenue. Why? There isn’t a franchise fee, they usually offer a 21% commission, and it’s an appealing add-on for your business. Furthermore, you simply have to call to set things up and become a U-Haul dealer.
What if you want to save money to make money? Reducing expenses may be a great revenue stream for you if this is the case. The science of saving money is a key part of being a landlord.
The first element of reducing expenses is taking care of basic repairs yourself. YouTube has a how-to video for just about every basic repair you can imagine. Whether installing new fixtures or replacing flooring, YouTube has you covered.
If you’re a beginner, we recommend outsourcing plumbing and electrical. Issues related to these things can be quite complex and are worth hiring a professional to get it right. However, there are a few things related to plumbing that you can probably tackle yourself:
- Unclogging backed-up drains
- Tightening leaky pipes around faucets, showers, toilets, etc.
- Draining your water heater
There are also a few electrical issues you can probably take on with the assistance of a simple YouTube video:
- Updating light switches and sockets
- Replacing and staying consistent with upkeep on breakers
- Hooking into existing wiring
Maintenance and lowering utility costs is another excellent way to reduce your expenses. For example, changing your HVAC system’s filter every three months will extend its life and save you money in the long run. Taking care of your appliances proactively is important if you want to reduce long-term energy costs. Tuning up, maintaining, and staying on top of things is always better than being reactive to preventable issues.
Using coupons and discounts to your advantage is an oft-overlooked way to help your bottom line. Why wouldn’t you try to get the best deals possible on everything? It’s worth your time to do a little digging and see where you can get bargains. Creating a relationship with a great vendor can also go a long way.
Lowering your financing expenses is another way to increase revenue. Take advantage of all tax breaks, refinance to a better rate, push down the appraised value of your property, etc. There are plenty of ways to find savings outside of the traditional routes many real estate investors normally go to.
You can also consider self-managing your rentals. Property management is becoming more expensive each year and if you’re looking to reduce costs and maximize the profitability of your investment, this might be a good option for you. However, this is viable for small or medium sized landlords and is not a solution for all real estate investors.
There are so many ways to increase revenue for your rental business. With a little creative thinking and some hard work, you can elevate your profit. What works for others may not be for you, so figure out a custom approach that best suits your needs and move forward with it.
Knowledge is power. So, watch those YouTube videos, do your research, find creative ways to make more money, and always refer back to this article to get you thinking on the right path!