Ep 127 | Ways to Increase Your Rental Property Revenue

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Today we're going to get better at wealth. We're going to talk around real estate investments. Specifically, the subject is going to be how to increase your revenue in your rental properties, specifically your single-family detached rental properties. Now, for many of you listening, you own rental properties. This subject is very applicable. For many of you though listening, you may not own any rental properties yet. Okay? So I say yet because you probably will own some more, uh, or own your first or own some more. And I'll tell you, maximizing revenue out of your rental properties is probably one of the most important things to do as a real estate investor, especially one that wants to be a successful real estate investor. Now, when we think about successful real estate investment, what I'm primarily looking at is not the appreciation of the, of the property. I'm looking at the cashflow generated by the property, the passive income generated by the property. And so in order to create passive income, what do you have to have? You have to have revenue. And you have to have expenses that are, that are deducted from that revenue. There are two ways to create more income: increase your revenue or decrease your expenses. Or I should say three ways, a combination of increasing your revenue and decreasing your expenses. Today we're going to focus on increasing our rental property income, our rental property revenue. Okay. So in no exact order, here are some things that I've done over the years to create more revenue from my rental properties. Number 1, add storage. Adding storage. Now, what do I mean? Years back, I went to, uh, the city of Tucson where I had bought a number of rental properties and had decided, you know what, I'm going to go buy a storage shed from Home Depot and drop it in the back of one of my rental properties so that I could store a few things. In Tucson. I live in Phoenix, Tucson's a couple hours south. I'm like, you know what, I need a storage shed. I need somewhere to store some things since I'm not living here. Let's go drop it in the backyard of one of my rental properties. I had, you know, yard equipment and things of that nature, just things I wanted to keep down there for easy access. So I drop a storage shed in the back of a property, and a few weeks into that storage shed being there, The tenant calls and says, hey, we need some storage. We were about to go rent a storage unit and we're going to pay an awful lot of money to do that. What do you think about just renting us that storage shed? And it was a light bulb moment for me. Cause I said, of course. And I rented it for, I think, an additional $30 or $50 per month in that particular situation, realized in one year's time, I would have paid off, right? Accumulated enough new revenue that I would have paid off that storage shed that cost me $300, $400, $500. I would have paid it off in full and everything after that was then gravy. So what did I do? I went and bought a number of storage sheds and dropped them in the backyards of all of my properties. And I said to new tenants or current tenants, hey, I know you might need more storage. There's probably not room in the garage. There's a storage shed in the back. It's brand new. If you want to add that to your lease, it's an additional $25 to $50 depending on the size. I'll tell you what, 100% of those storage sheds are used. Why? Because people are hoarders. And it's a hell of a lot cheaper to— and easily easier to access to have that storage in your backyard than it is to go to a storage facility. Those things are pretty costly. So one way to add revenue, Add storage, invest in storage like sheds and pass that cost onto the tenant. Over the course of time, that'll become free cash, uh, and, and a 100% paid for storage shed. Next, in some multifamily properties that I have, smaller multiplex, I always look to add or increase parking. When you add or increase parking, you have the opportunity to charge for additional parking spots. So in the complexes I have, I'll give you an example. Uh, my Metrics Masterminds group and I, we just, uh, acquired a 12-unit property together. At that property, there are 9 parking spots. However, when I measure out those parking spots, I think we can get another 2 or 3 spots in that parking lot because the other ones are so wide. In doing so, we will have 3 additional spots that we can charge for and make them reserve parking. Do the same with the other 9 where they're presently not being charged, but now that we're the owners, we will in fact charge. And in doing so, call it $25 a month. You can see 12 unit— I'm sorry, 12 parking spots. It's another $300 a month, another $3,600 a year just in creating more parking. Another thing to do, a little different than what I just talked about in terms of adding, adding new services or adding storage, minimizing your turnover. Now, this one sounds kind of obvious, but maybe not as obvious as it needs to be, right? Like, reducing vacancy is the number one way to increase revenue. So, if you've got somebody who is, you know, debating with you over a rent increase, or maybe it would just cost you $25 of it, like reduction, to keep them there or get them into the property. I'm not saying just always bend over, but I'm telling you, eliminating an additional month of vacancy is a great way to increase the revenue of your property. Again, I don't want you to give in and it, and it impacts you down the road. But an example of this in this past year, it's, there's been a good amount of turmoil in the rental market. And so what I've advised my team to do is keep all of our rental rates flat. Now, most of my peers are increasing. Many of you listening probably increased, but I'll tell you what, as a result of me being flat and everybody else increasing, I was able to say to my tenants, guess what? No rent increases this year, but you gotta commit to a renewal of your lease right now. So we went to many of our tenants that still had months left on their rental contracts and said, listen, we won't adjust the price. 'But you've got to commit for another 12 months right now.' Again, what did that do? It eliminated vacancy. In addition, another thing you can be doing, kind of a little different or the opposite of what I was just describing, when you think about rent increases, clearly rent increases are a way to increase revenue. One thing I've noticed though, so many people do not actually build in the rent increases into the contract from the start. So, say you've got a tenant that signed a 12-month lease. You can say in that lease upon renewal, or if you opt to renew, there's an automatic 3% rent increase. And we're just structuring it right at the start as opposed to having the conversation down the road. Now, is it possible rents should be greater than 5, uh, 3%? Sure. Is it also possible that there shouldn't be any increase at all based on the market? Yeah, that's possible too. So I like the stability that comes with, hey, If you renew this lease, there's an automatic 3% increase. And by the way, that's somewhat the standard. People expect slight rent bumps. Next thing, an idea for you, something that we're presently evaluating and just started doing. We're eliminating the deposits, the first month deposit. Now you'd think, okay, Brian, doesn't that reduce revenue? Like what if you get stuck with expenses? Well, here's what we're doing. We're actually saying, in lieu of giving us a full first month deposit, why don't you just pay an extra $100 or $150 per month, and we'll more or less put that towards what would be considered a deposit. In other words, don't give us the money up front. We're just going to charge you an extra $150 every month. Now, that $150 in this example goes on indefinitely. So typically a security deposit is what, one month's rent. So let's just say it's a, a $2,000 property, which means you'd want a $2,000 security deposit. Well, we're starting to eliminate our security deposit and saying, you know what, instead of that, how about you just give us $200 a month in, uh, in addition to the $2,000. So your payment's now $2,200, but there's no cash outlay. There's no dollars tied up. You just gotta pay a premium and you're gonna do that. The length of this lease. So even if they go just 12 months in that scenario, $200 times 12, $2,400. The deposit was gonna be $2,000. Most of the time you're giving back a portion of that security deposit. In this scenario though, we're keeping 100% of the funds. So again, it's just a trade-off. We're, we're taking the risk on the front end of saying no deposit. So we have some risk there, but we're also charging a premium because we're eliminating their need for a cash outlay. The very last thing that I'm going to mention today, there's some others, but there's one more I'm going to give you. And that is, uh, simply upgrading the property. It goes without saying that if your property's nicer or you have more amenities or you upgraded a bit, you could charge a bit more. One thing that we've done in a lot of our properties, especially multifamily, is we've either added laundry or added better, uh, I'm sorry, uh, laundry services and refrigerator and washer. I'm sorry, a dishwasher. So improving, improving these things allows us to market and charge a few more dollars. In a multifamily I'm working on right now, we are adding laundry to every unit, whereas they didn't have laundry services before. They had shared laundry. Now we're putting stackables in there. That do both washing and drying and barely take up space. Now I'm having to wire for it, I'm having to create, you know, water connection for it. Yes, there's cash outlay, but the amount of dollars we're charging above what was rent before is significant enough to offset those costs over time. So just adding or upgrading the property, things like, you know, fixing or, or adding a newer fridge or adding a newer dishwasher, These things, you can increase rent because they look beautiful. And of course they work even better than what you had. And, and it pays for itself in 6 months to 12 months' time. So on that note, we're going to wrap up. Not really a focusing question. Just wanted to give you some tactics, some strategies to increase the revenue of your rental properties. Hopefully one or two of these made a big difference in your world. Let me know which ones you used. I'm sure we've created a few more dollars today. That's all we have for today. The No Days Off Podcast. Thank you so much for listening. And remember, every single day brings a new opportunity to get better. So let's get after it.