How To Create Extra Revenue On Your Rental Properties

Three. Hey, it's Mark Podolski, the land geek with your favorite niche real estate website, www.thelandgeek.com. and I'm really excited for today's guest. He's got a unique spin on a old sort of strategy. So very excited. But before we talk to our guest, I'd be remiss if I didn't properly introduce my co host. You know him, you love him. Scott Todd from scotttodd.net, landmodo.com and most importantly, if you're not automating your Craigslist and your Facebook postings, posting domination.com thelandgeek and I'm gonna throw another one in there just for fun, for some learning like Zapier. Investorninjas.com Todd how are you?

Mark I'm great.

How are you? I'm great. I'm great. Today's podcast is is sponsored by flight School. Learn more about flight school. Just go to thelandgeek.com training in 16 weeks. We'll get you up and running with the land geek Sherpa himself, Scott Todd. So today's guest is al Williamson from LeadingLandlord.com and if you don't know about Al, he's a former civil engineer and the author of the Building wealth with Inner City Rentals. It took him about seven years, but he's figured out how to create enough side income income and over and beyond his market rate rents to cover the monthly mortgage of his apartment building. And he's packaged all his ideas and put those into a book called 40 Ways to Increase the net income of your rental property. He's got a lot going on and I'm really excited to talk to Al Williamson. Al, welcome.

Hey, Mark and Scott, how you guys doing? Good. It's a pleasure to be here.

We're great. So Al, let's just rewind the tape and tell us how you got from becoming a civil engineer to quitting your job and becoming the landlord guy, if.

You will, the landlord scientist. Well, it was after I started in 96 with a three unit building that I squeezed my new bride into and we were house hacking, so we did that and that thing quadrupled on us and which led us to an apartment building, eight unit building. But during the time, even though I was a civil engineer and I was doing good with my numbers, I was tracking, I was noticing that my maintenance cost was wiping me out. It was taking a year's worth of profit to put on a new roof. The paint, you know, there goes my profits. And so I Started figuring out, hey, there's gotta be another way. There's gotta be a, well, why can't we find some other ways to make money? And that started my quest because I figured I wasn't alone. When I got other landlords by themselves and I said, hey, this is happening to you. They would say, yeah, it looks good on paper. But when I look at my net after, after all of my maintenance and everything before, you know, of course, with before depreciation and all that, it wasn't looking so good.

All right. Wow. So how did you solve the problem?

Well, I decided I was going to start collecting ideas on side income. You know, I wanted to diversify my income just like any business. It sounds revolutionary for. For rental business, but you don't want just one source of income, you know, so let's see if we can pack this thing. And I set the challenge. I wanted to pay for the mortgage entirely with income that wasn't rent. That was my quest. So I started just collecting ideas and testing them and kind of like a. A librarian would just trying to file them away, different categories and seeing if I could do it. And in 2015, I was able to do it with. With my apartment complex, paying the mortgage with income that didn't include rents.

Nice, Nice, Scott. Todd.

So what did it include? Like, how did you do it? Like, what if the mortgage.

So clever. Some different things, different ideas. Some I tested, some I got from squeezed out of different people. Such as, you know, there's that payday rent. Collecting your rent every two weeks, you end up with a extra. You know, if you collect it every two weeks, then you end up with an extra month's worth of income at the end of the year. If you do the math, you see that you end up with a. Because there's an extra week per every two months. Right. You guys are following me. You have to.

I'm with you. So I'm tracking what you're saying. So like essentially if you. You offered. You offered somebody the ability to pay their rent every two weeks when they got paid, as opposed to once a month. That gave you a 13th month.

That's right.

Rent.

That's right.

Okay.

That's one.

I guess the other ideas get to get that, like at a big scale, like, you had to have a lot of different things. Right.

Well, I see I did a composite of things. So that's one thing I did. Another thing I did was, was I. I provided. Why for this, for my eight unit building. Provided WI fi for all the units they were paying their Own. Everyone's paying their own Internet. So I covered everyone's Internet and gave them a 50% discount. And I took savings, created income for myself that way. That's the second thing I was doing. I had a bike sharing program earlier on in 2015. It's really common now here in Sacramento, California now, lots of bike sharing, but I was doing in there, I was charging $40 a month for that. And I started housing international students and doing furnished rentals. So, and, and, and making it a flexible terms on my leases. So I was able to increase my income as well with furnished housing. So all those, all those things together, and I think I'm missing some others, but I, I itemized it a few times on bigger pockets when it happened when I, when I passed the finish line. But all that and writing that book, 40 Ways to Increase the net income in your rental property, led me to conclude that it was furnished rentals that was really set the stage for all these other income streams. So that's why I started focusing solely on furnished rentals. This gives you a lot of safety nets and it opens up a lot more opportunities for ancillary income.

So can you expand on that? So how does it work with a furnished rental as to, as opposed to an unfurnished rental?

Oh, absolutely. So I see what's like for one of this Sacramento apartment building or any dwelling, you can operate it, you can leave it vacant. That's one way you can do traditional landlording. Everyone knows that you can do furnished rentals long term. Long term furnished rentals and earn about 30% above market with, by having furnishings. Okay. Then you can do, I call it flexible term rentals, which is kind of like Airbnb falls into that, where you flex your terms and you flex how many pets you have and things like that. And then you can do a dormitory type of model, like how kind of renting rooms. And then the highest use of your place is corporate housing. So with the same dwelling, you can do all those different types of operations inside of it and generate up to 10 times more on a net income basis with the exact same property by varying how you operate. So that's, that's the. As soon as you go furnish rentals, let's talk about the downside. Okay, so if you can't do corporate housing, if that fails on you, then you can drop back down to do Airbnb. Okay. And everyone knows how to do that. And if that doesn't work for you, you can drop back down to doing long term furnish rentals. Everyone knows that that's kind of, there's lots of transitional housing, things like that you can do. And if that doesn't work, then you can always fall back to traditional landlording, which I think is the riskiest place to be because if you fail there, you don't have any more to fall back to. You fall back to being vacant. So I think the safest thing you can do is furnish your rentals and enjoy making three times more net income than a traditional landlord.

Very interesting. Very interesting. So is this location dependent for corporate housing? Is it, I mean, what's sort of the sweet spot when you're going to look for a rental like that? I mean, are you going to look for like you have like an eight plex, are you going to look for a fourplex or you're going to look for a single family home? What, what type of dwelling and what type of location is ideal?

That's a great question. Now I think every dwelling, I call it dwelling because that opens up boats and everything, anything that you can sleep in has the highest, best use. Okay? So there's, there's things you can do with whatever rental you have right now. And then you can always acquire something that's right in the sweet spot or in the happening place of your downtown. So if, if you, one of the rules I say is there's an extended stay hotel, I'm talking about extended stay America, residence end, those types of things that have a kitchenette in, in them, then that means without a question, the research has already been done because it costs about $22 million to create one of these things. The research has already been done by people that know way more than you or I could ever learn. So that means that you can do corporate housing and that if there is one, if you see it in your town, that means stays on 18 days on average is viable. No question about it. That means, which means that, you know, stays over 30 days is, is part of that mix. So that means you can start competing for those people who are coming for 30 days and longer. Because, Scott, you ever stay at a hotel for a long period of time, for like two weeks and longer?

Well, not, not in one trip. But I, I have relocated, have relocated for work and I would, I would stay at the same hotel for like six weeks, but Monday through Thursday or Sunday through Thursday.

So did you get a little bit of stir crazy in there?

Yeah, that's fair to say.

So that's what we find. That's why a furnished rental just can compete against a corporate Extended stay, no question about it, because you can get a lot more people enjoy a lot more a full size refrigerator, full oven and, and they can do it for a lot less. So there's just no competition at all.

SCOTT so one of the questions I have is like, you know, I was looking over the, the book that you referenced, the 40 Ways to Increase the net income, and one of the things you talk about in there is like, you know, power plants or utilities, if you will. Right, right. And you know, in there, you know, like, you talk about like solar, whatever. Like can, can I. Because I've been told you can't. Like I've been told that and obviously every state's going to be a little bit different. Right. But essentially what I've been told is that you cannot profit from utilities at all. So kind of like the example that, that you gave on the, the Internet, for example, like I know a guy that owns some multifamily, the properties were not sub metered or the units were not sub metered. And so essentially he had one unit going in and then what he did was he determined like how much that they were using and actually what it was, it's from a well is what it was. I apologize. It was from a well and they weren't sub metered, they would just go in there. So what he was doing is he's looking at the cost of the well and added in some labor, et cetera, charged the residents for the, for like the well water, the maintenance, the, you know, the stuff to get in there. Next thing you know, he starts with a big old fine because he was profiting from utilities. Like did. Have you found that at all? Have you looked at that?

Well, there's some ways around that. Absolutely. So one thing is with this talk, go back to your solar plant or your power plant, they do want you just to have enough to power whatever dwelling that's underneath there. Like they don't want you to. It doesn't make sense in their minds to have a really big system if you have a small house. But nowadays as things are always morphing, the industry is always evolving. You can also offset your, like you can put a solar onto your rental and it can offset the power, the bill on your personal residence. So they can, they're moving things around now. They're allowing you to, you can also purchase into a, a plant in the desert and use that to offset your power. So there are decentralizing it and moving it up, accounting for it on your bill and allowing and turning into a credit and allowing you to use it however you choose. So that's how, that's how that's happening. There's, there's things coming out all along as solar drops in price is, is evolving. Then the next thing about. Let's talk about WI Fi. If you walk into your local Starbucks, they give you complimentary WI Fi in exchange for you buying, participating their service. I call that the coffee shop model. But they're not charging you directly for the WI Fi, they're charging you for the coffee. So that's essentially it. I'm not charging people for quote unquote, WI Fi. They get a complimentary in exchange for other services such as a newsletter. Same thing, same thing. You go to Home Depot, they give you complimentary WI Fi and it's all spread out through, through their, the markup in their prices. So it's the same thing. You're just offsetting however you bill it so that you fit into the right category just like everyone does all over every business does it.

So Al, knowing what you know now about landlording, what's some of the worst advice you see or hear given in your area of expertise?

Oh, the worst advice would be to. Some of the. Oh boy. I never even, I never wrapped my mind around thinking about that. That's a, that's a good question. I definitely would. Yeah, I definitely. The, the people that lean towards overpaying for a, a rental with the idea that they're going to do Airbnb to make it work I think is the absolute silliest thing ever. It takes away your safety nets that I was kind of talking to you about how you can drop down. You're not going to be able to do that. You're just going to be upside down. So I don't like that. I'm not in favor of the adversarial approach to landlording that you often, you know, traditional landlording is where, you know, you got to reinforce your rules, which you absolutely have to. But I think there's more joint venture opportunities to, to create some profit centers that the tenant can enjoy as well. And that puts you into, that kind of spins your flywheel in the money making direction. And once you start doing that, you like for example, if you did a joint venture for parking, if you, if your rental was located in an area that was a high demand for parking and allowed the, you know, allowed the tenant to open up a parking spot, they make room and they shared in some of this, the, the benefits of sharing their parking space. You just simply modify, monetize that. So that's kind of one opportunity. Same with car sharing. There's opportunities to park an extra car and generate revenue for there if the tenant's cooperative on that. Same thing with outdoor advertising. You can turn your rental into a billboard, so to speak. And if your tenants can enjoy some of the savings, they're more apt to allow that to happen. So on and so forth. As soon as you flip over to, hey, let's create some joint ventures, I'll let you share in some of the profits that are being created. Then you swing this door open to something that, that needs a lot more exploration than the whole beat them down and type of thing.

I think that's brilliant actually, because I can imagine that if you do that those rentals instead of renting for a year or six months or three months, more apt to stay longer.

Absolutely. Why would they leave? They're better able to stay and they can enjoy a little bit higher quality of lifestyle by participating.

Yeah, it seems like Airbnb now is like the hot thing. What are the advantages of Airbnb and where should we be worried about Airbnb?

Well, that's, that's a great, great question. And first I'm going to tell you that Airbnb is just one planet in this solar system of short term rentals. Okay. So, but it has the biggest gravity pull. All right? So we'll best, we're going to shrink the, shrink this vast world down to just Airbnb and say that, that Airbnb has a, the premise of traditional short stays where people stay on weekends and at a time, four days at a time, business travelers. That's kind of the way I personally use it and many people do. Well, you can, you're gonna, as, as a rental owner, about 10, 10 stays or 10 days of Airbnb is gonna be equivalent to about one month's worth of income. So you could make up to three times with Airbnb if you were doing, if you're able to fill your rental for a full month. Now I focus on extended stay version of Airbnb. Just like there's, there's hotels that like Holiday Inn and then there's hotels like extended state America. They have different emphasis, they grab a different crowd. So I think doing extended stay version of Airbnb, you're gonna, using Airbnb as a artificial intelligence that it is. This is a virtual thing. Using this artificial intelligence has a masterful marketing. You're able to find out who's coming to your area that's looking for an extended Stay. And once you flush that out using Airbnb, you can create some relationships directly with those companies and just bypass them so that it's a great booster rocket into the world of corporate housing and extended state housing, I should say into the universe because there's many different planets out there in the universe and there's a world of opportunities within Airbnb. You can make a fortune, and it's easier to make a fortune including it and without out there in the universe as well.

Scott Todd.

I mean, I think, I think it's a great concept. I mean, like, I think that really, really that's the thing is like not just saying, okay, I'm going to have this unit and this is what I'm going to do with it. It's more of you have many different options and a lot of people don't realize all of the options that people that you have when you have this asset. Right. It doesn't always have to be in that traditional sense that we always think about.

Right.

So, I mean, I think that's really, really cool and kind of creative thinking, you know, and I think that, I think that what you're hitting on is right, you know, like there's many different opportunities for ancillary revenue with any type of real estate, you know, like whether it's, you know, car sharing or, you know how like, I mean, like literally billboards, you mentioned billboards, for example. You know, like that's a great revenue for you, the property owner. But then if you're taking some of that money to help offset some of the rents, for example, then that will become kind of differentiator for you to keep your tenants, which I know in multifamily is a big, you know, that turnover is a big, big component of it.

Oh yeah, that can completely drains you. That's, that's one of the worst things. My, like I, out of my eight unit, my laboratory, I call it three of them, I have people that have been with me for six years and longer and so they're my long term tenants and they think, and again, I focus on three to six month stays. And so my long term tenants think that they are Airbnb hosts. They welcome the guests, they enjoy slightly, they enjoy below market rents themselves because I incentivize them and they take care of everything. They help people out, they answer questions, they make people feel at home. And it really works by incentivizing them to, to with lower rents and a better kept place, a well groomed place, because I can afford to keep it groomed it really, really works out.

It's really brilliant. I got one last question before we get to.

Oh, don't stop the fun.

I know, I know. What is rental arbitrage?

Okay, well, rental arbitrage is when you, you pick a location and a place where you think it's going to be a great short term place for short term rentals and you talk to the owner of that place. It could be a condo, it could be a house, it could be whatever. So you talk to the owner of it and you tell them that you want to do your expand your corporate housing company there and you work out all the subleasing clauses right off the bat. Got to address that. And then the goal is to bring in two to three times the income of what the expense will be like. You have to pay, say Scott's the mean landlord and I have to pay him $1,000. Well, my goal is to bring in $2,000 and the difference I get to keep. But Scott has to take care of the maintenance of the place because I'm just a regular tenant. So that's the sweet spot. I can pick the location where I think I'll be really successful and acquire it or control it. Is that idea of controlling but not owning to get the cash flow, the whole Rockefeller principle? So that's rental arbitrage. You just control it through a lease instead of a mortgage and enjoy the cash flow without the maintenance.

What are the risks?

The risk is that you can't keep it booked. Of course they fall through. So it's all a marketing game. You got to know how to market and that's really important. And also if you can't, if you can't get it, get it rented. Then you can drop back to being a traditional landlord and break even. Right. And run out your lease. So you have a safety net. That's what's great about a furnished rental. As soon as you furnish, that's your safety net, you got many options. And if you can't do that, then you're going to have to use the exit clause in your lease agreement. And sometimes it's one month's rent or two months rent, whatever the clause is, according to fair housing in your town. But it's not like going bankrupt, it's not like losing a foreclosure, not at all. The risk comparing to is minuscule.

Okay, and then like how much money are you spending on furnishings to like furnish, furnish a unit? Is it, you know, $25,000 like one guy that does Airbnb Rentals told me he spends 25 to $30,000 per unit to get it up, which seems kind of logical, but also a lot of money too, right?

Yeah. So it's really important when you, when we, when you're talking about short term rentals or especially rental arbitrage that you're talking about time to break even. So it's not how much you're spending. You're saying, when will I break even? Would you agree?

Well, I think it's always the case.

You know, that's the main thing. So I aim to break even in seven to eight months with it. And then, then as cash flow from there on out, some people who don't think that way, they break even maybe two years and then they quit. By the time they break even, they're burnt out. So that's why that break even is the only mature way of talking about how you're improving your rental. If his cash flow supports that $30,000, he can break even within a year. Then that sounds like a good business if he can squeeze that time down to six months. I have some, some people that I coach have got it down to four months of a break even. And, and, but they were being resourceful. You know, when they furnished their place, they were using, using their friends, furnishings, and they were using used things. They were getting things free off of Facebook. They're being very resourceful. So that's the way to create the money that you can actually. Because only the net income after you break even is something that you can use for your lifestyle. Right? Right. If you're still underwater, you really can't spend that money. You're just filling back your coffers.

Wow, this is fascinating. Instead of being the leading landlord.com you should be like the most creative.

I'm blushing.

So, so we're at the point now, the podcast, where we want to ask you for your tip of the week, a website resource, a book, something actionable for the art of passive income listeners to go improve their businesses, improve their lives. What have you got?

I got, you know, I'm really excited to offer an expense reduction for people who own property, which is everyone has drains, and drains get clogged with hair and different things. Sometimes you end up calling a plumber or doing the work yourself. But all that can be eliminated if you do practice preventative maintenance. And I recommend a Green Gobbler. It's the product you can get at Home Depot. This is the product Home Depot themselves use at all their stores, is a biologically friendly Drano product. And what you do is instead of waiting for a clog, you just throw it in. Every time you go visit the property, you make it available for your tenants. You over supply your tenants on it because they're not going to burn their hands. They don't need gloves or worrying about chemical spills. So Green Gobbler is it, it is based on products that we used in wastewater treatment at the wastewater treatment plants, the breakup clogs. So it's not magical foo foo dust. It's, it's a proven product that's, that's used as waste water treatment plants. Instead of waiting for the product, the water, you get all the way down to the wash treatment plant. You can actually, before you inject, you can inject it right up at the point of use and prevent those clogs from happening and prevent any plumbing bills. So how's that?

I love it. I'm ordering it right now.

Not good for my house.

It's pretty cheap. It's 12 bucks on Amazon.

Just, just add it first of the month, throw it in where we have, we think you have a product. If you're doing short term rentals, you throw it in between guests and you'll never have an issue. So basically you're gonna have an umbrella and think it's not raining. So that, but don't lower your umbrella. Just stay up on it.

So just in the, in the bathrooms, the showers, the sinks.

Yeah. Especially places that collect hair. This, this causes the hair to get slippery and it slips through the, the pipes. It doesn't clog up.

Wow. All right. Done and done. I just bought it.

All right, that's gonna save you a lot of money.

I love it. I love it. And I'm like the worst homeowner ever. So my wife's gonna be really impressed. Anyone should not own a home.

It's me saving marriages. One step at a time, one day at a time.

There it is. There it is. Scott. Todd, what's your tip of the week?

I mean how do you compare to the Green Gobbler man? I'm on their website and notice that like they have like vinegar mixtures too, which, you know, vinegar, that's good for anything, man. Like Mark, you need, you need to like visit some, spend some time on their website.

I know.

And to help you remember to do that, to help you to remember to go back to their website, my tip will help you remember things. Check out Elephant rocks.

That's it.

Like not.com, but like elephant dot rocks, which I didn't even know was a Real thing, but it is. And what's cool about elephant rocks is that R O, C, K, S. What's cool about it is that, like, you can text. You can text elephant and use, like, real normal language. Like, hey, remind me to call mom tomorrow at 10am and then it will. It will schedule it, and it will remind you at 10am to call your mom. So, like, stopping, going to your calendar or whatever, you can speak normal language and it will know things. So, like, you can share, like, hey, mom's phone number is this. Or this is mom. And then, boom, it begins to know and to support your life all with, like, natural language. It's pretty cool.

That's cool. That's a smart elephant.

How is this any different than reminders on the iPhone?

Oh, man. Because the thing is, is that one, like, for me, I don't like reminders on the phone because I do. I prefer text. And so, like, I'm always sending myself text.

Okay.

And so, you know, essentially, because it sits there in the. In the pieces. Opposite. Let me go. Any other app. How many times are you in text in a day? So that's the big thing. I don't know, man. It's pretty cool. You should try it out and you can try it out.

I'm doing it right now, so go right there.

Yeah. Smart elephant set up.

Wait, I'm gonna go to 9, 1.

9, 3, 73373, 6, 4 6, 3.

And then 6, 3.

Yeah, and then you have to use the word setup plus your name. Like, Mark.

Do I do a space?

Scottsdale.

Okay, Scottsdale. Let's see if this works. All right, I've got nothing back.

Give it a minute.

Oh, elephant is ready to roll. With time zone set to Australia. Hobart. What?

Yeah, you put it on. Did you type Scottsdale?

Yeah, I think it thinks I'm in Scottsdale, Australia. Well, that's interesting. All right, Scott. Todd. I'm gonna try it again.

I think he took off.

Did he leave?

No, I bold. I am bold. I'm still here.

All right. I tried it again with Phoenix. All right. I think it's cool. I'll try it. But you know what? No one's gonna beat my tip of the week, because my tip of the week is gonna bring you wealth, and that's. Learn more about Al Williamson and his incredibly creative ways to increase the net income of any rental property. Just go to leading landlord.com. leading landlord calm. I'm just looking at his blog right now. The story behind the most profitable rental arbitrage on record. Cool. Keyless lock for wood gates. The seven laws of abundance. Using leak detectors to cut insurance premiums. That's like my next buy. Wi fi a landlord's untapped profit center. Eliminate plumbing bills forever. We just learned about that.

Man, those are good ideas.

I know. Business plan for arbitrage. Six steps. Get started with rental arbitrage. This is incredible, Scott. Todd, I think I have shiny object syndrome. Help me.

Stay focused, Mark. Stay focused.

Okay. Okay, Al, you know. You know what beats your model?

What's that?

No tenants and passive income, which leads me to Al Williamson. Check out how we do that@thelandgeek.com if you're getting value from this podcast, please do us a favor. Just do little three little things. You got to subscribe, get a rate, get a review the podcast, Send us a screenshot of that review. To support the landgeek.com we're going to send you for free our $97 passive income launch kit. And you know what? Share the. Share the podcast on the interwebs. Put it on the social medias, the Instagrams, the Twitters, the Facebooks, I don't know, the Snapchats, whatever it is.

Yeah, no, I was gonna think, like, you know, I heard a. I heard, like, a brilliant marketing campaign today. I'm just trying to figure out how we can incorporate into what we do here, which was know the brand Popsicle. They make the popsicles, like the Popsicle company. And if you remember when we were kids, the popsicles were like two popsicles in a pack, right? Like, you had two, and you had to go and you had to break it. Yeah, just share it with somebody. Or you had to eat them real fast before they melted. Company got smart and they decided to make them singles. So they said on their. Their Twitter the other day, they're like, hey, if you. If this tweet gets retweeted a hundred thousand times, we'll bring back the. The doubles. Well, it went, like, well more than a hundred thousand times. Okay, so I think that the doubles are coming back, so maybe we should do something like, you know, like, I don't know, share this a hundred thousand times. Give Al some love. Give, you know, give us some love. And I don't know, like, what can we give them?

Like, I don't know.

I want your super pack of your launch launch kit done 100,000 times.

Everybody gets one. Everybody gets one.

I like it. Exactly. You get a launch kit, you get a launch kit. Just email us. You don't even have to leave a review. Just retweet it a hundred thousand times. Everyone gets a launch kit. I love it.

All right.

I want to thank everybody again. Thank you. Al williamson from leading landlord.com. scott Todd, are we good?

We're good, Mark.

Al Williamson, are we good?

We're good. Hey, thank you so much for having me and share me with your audience. I appreciate it.

Thank you. And listeners, you know what we're going to say.

Let freedom ring.

Thanks, everybody.