3 Effective Tactics to Boost Revenue From Your Rental Property

The usual tactics to boost revenue from property rental is acquiring as many properties as possible. While this may be a valid method for those who are in the property business per se, when it comes to “regular” people that have just a few properties to rent, a better approach would be to focus on their current portfolio and see what they can do to earn more without investing more. Let’s talk:

Minimize Turnover

Turnover is one of the worst things for everyone in the property rental business. Every turnover costs money and going through tenant after tenant will cost you more than you’ll earn. Apart from advertising costs, there are costs of vacancy, patching and painting walls, replacing and repairing flooring, or fixing anything else left broken by your previous tenant, etc. But, how do you minimize turnover and keep the right tenants in place? There are several points to it:

• Lowering the rent: Although this may sometimes be counterintuitive, it does show the tendency to increase revenue, long-term and here’s why. When tenants don’t have to pay high rents, they appreciate the place they live in and usually tend to keep it in good shape as if it were their home. Also, they are less likely to leave.

• Customer service: Whether you have a property manager or personally manage your properties, you’ll keep your tenants in place if you treat them with respect. The more professional you are, the longer they’ll stay, meaning – make sure their concerns are valued and their reasonable requests dealt with straight away.

• Open agreement: It’s in your best interest to keep your tenants in place so make sure you stay away from shady deals, unclear arrangements and, well, lies. Stick to the agreement you initially made with your tenant and be open to suggestions, changes, etc. When your tenants know you can be trusted, they are likely to stay around for a long time.

• Increase rent strategically: After having told you lower rents are king, we have to explore rent increase as well, because, let’s face it, you’ll have to increase the rents eventually if you have a valid reason. Also, your tenants shouldn’t expect the rent never to increase; what they should expect though is a strategic and open approach to the increase. If feasible, inform your tenants right away of potential rent increases over, so they’re not surprised when the day comes.

Decrease Vacancy

To minimize vacancies loss, try to find a long-term tenant who pays regularly and has a stable source of income. If it happens that your tenant has to move, you can minimize vacancy by keeping turnaround time to a minimum. For instance, if you are renting out a condo to two people and one of them has to leave, the best way to keep your occupancy at virtually 100% is by posting ads the minute you learn of your tenant’s move. That way, whether your property is in a good neighborhood or one with lower demand, you’ll have interested parties looking to book a room in your apartment.

Add Revenue Streams

If you are running multi-family properties, add services like coin-operated vending machines, laundry and other useful services that will add resale value by raising the property’s return on capitalization rate or asset value. Plus, they’ll be super convenient for the tenants.

Boosting rental revenue can be achieved by operating a smaller number of properties as long as you’ve got an intelligent approach to the matter.

Vanilla or Grey? How to Choose the Right Space for Your Property Needs

by Joe Killinger

When you begin the process of looking for a new office or retail space some people get confused between a Vanilla Shell and a Grey Shell. Because each market is different, you need to specify what your expectations are and what type of property the landlord has available.

Vanilla Shell

A Vanilla Shell (also known as a warm shell) is a commercial real estate term that refers to a landlord delivering a space to a tenant with the basic finishing’s

The finishing’s typically include taped walls ready to paint, electrical panel and outlets, sealed concrete or finished floor, finished ceiling with lighting, HVAC including duct work and controls, finished bathroom (if no common bathroom), and sprinkler system if required by code.

However; depending on the landlord, it may not include all of these items, so it’s important to clarify what is included. Since Vanilla Shells offer tenants a close to finished space, they allow for a quicker move-in time and provide less initial hassles.

Grey Shell

A Grey Shell (also known as a cool shell) is space offered by a landlord that is completely unfinished.

You will generally find bare stud walls, unfinished floors, and no plumbing or electrical. The space will more than likely include a HVAC unit but no duct work or controls. If required by code, the sprinkler system may be installed but not dropped to finish ceiling height.

As a tenant you need to be aware that this will dramatically increase your costs for tenant improvements, especially if you plan on adding drains and/or bathrooms. Although Grey Shells do require more tenant maintenance they allow for greater flexibility for your individual needs.

Additional Considerations

One thing you do want to remember is that if you are doing a substantial amount of work you will want to have a longer lease and therefore the landlord should have more flexibility.

It’s important to work with an agent that can help negotiate assistance from the landlord for you to complete additional work, either in the form of rent credits or additional tenant improvement dollars from the landlord.

Finally, it’s always a good idea to have your team ready (including a contractor) to prepare a budget prior to looking for your new space. In the end it can save you a lot of time and effort.

Is Small Box Retail The Way Of The Future?

“The economics are in favor of the small-box retailer, having to spend less on your lease rate means you can spend more on marketing, inventory management, customer management and of course less staffing.”

A five room movie theater, redesigned in the Pacific Palisades. (Original Photo by Mel Melcon / Los Angeles Times)

A small-box retailer operates their business very much the same as their larger counter parts but utilizes less square footage. This means that they don’t need as much space for their products and therefore have a lower rent and fewer staff to deal with which equals a lot less overhead.

With the small-box locations you don’t have as much inventory but you can adjust by having an online presence or having the ability to send the clients their purchases the next day.

The economics are in favor of the small-box retailer, having to spend less on your lease rate means you can spend more on marketing, inventory management, customer management and of course less staffing. We’re seeing several retailers that are currently in big-box location grow their presence by opening small-box locations that aren’t far away. There is an entire new development of small-box retail stores that just had its grand opening in the Pacific Palisades neighborhood in Los Angeles on September 22nd and it’s already huge hit.

Customers will find small-box stores located in that development that have big-box locations within a fifteen minute drive. If this development proves to generate continued success it could be a lightning rod that proves this is a great way for a retailer to grow their market share while maintaining control of their overhead costs.

When walking the developments that are focusing on small-box retailers I noticed that they’re customizing merchandise toward clientele that are in the area and are creating an enjoyable shopping experience for their clients, especially targeting the higher end market.

The developments themselves seem to be focusing on creating the best experience for shopping that they can, art is being placed in public, and community events are already being organized or promoted in public.

The convenience and atmosphere that the Pacific Palisades development provided is something that I believe will create an interest for further small-box retailers in the near future.

I can see how these small-box stores could easily become the way of the future

What is the True Cost of an Eviction?

Being the CEO of a real estate services website that offers tenant screening, I am obviously a huge proponent of tenant screening. As you may already know an eviction can cost an investor thousands of dollars, but I also wanted to look at the nonmonetary costs of an eviction and see which is a greater liability to the landlord and to the community.

COSTS TO THE LANDLORD

Monetarily, an eviction can cost a landlord:

• Lost rent (typically two-three months of rent during the eviction proceedings, sometimes longer)

• Make Ready Costs (to get the apartment ready to rent) between $500-$2,000

• Lost time to lease (an additional one month of revenue)

• Concessions given to a new tenant and/or advertising (1/2 month)

• Legal Fees to Attorneys ($200-$750)

• Court Costs ($100-$300)

Perhaps you’re planning on charging the tenant for all of your eviction fees. You might be pushing your luck as many tenants are uncollectible. In fact, there may not be any money to collect. After all, if they had the money, then they would have paid the rent. So even if you win the court battle, it’s still on you to pay those costs.

You may think to yourself that’s ok, you’ll get it from them later when they are able to pay up. Maybe you’ll hire a debt collector to follow up with them. The problem here is that the debt collector is going to pocket 60% of what is collected, which is typically only a small percentage of what is actually owed. So you’re still left with a loss of potentially thousands of dollars.

Obviously, these numbers will vary depending on your rent price, county, and whether or not your tenant vacates willingly. From what I’ve heard from other landlords, tenants do less malicious damage if you go through the court system.

As you can see these costs add up quickly.

COSTS TO YOUR COMMUNITY

A bigger impact is what evictions can do to a community. Within the immediate apartment community, an eviction may tend to make the other residents unsettled. They look at the ownership as someone they trust to protect the community in which they live. Evicted tenants typically don’t have a vested interest in the community, and if it occurs on more than one occasion, your current long-term residents may start looking to move. They may be worried about who you will decide to be their neighbor and if you as the landlord are actually screening a potential resident.

Your property is an investment, but to your residents it is a home of which they are proud. They will talk within the local community and these folks can be your best source for marketing which helps keep your investment stable.

The opposite can be true though, if you chose not to screen people properly and you are having a heavy turnover of residents or crime. Especially if there’s police presence, your residents will be telling that story around the community and in turn you can spend more on marketing to find new renters.

It’s difficult to place a monetary value on the financial loss due to having unhappy residents. We all know that creating a community that you are excited to be a part of will make it a lot easier to pick up that piece of paper and put it in the trash, because you take pride in where you live. The value of a good, loyal tenant that does not want to move, and cares about the property has been well documented, but hard to define monetarily. It is always good business to find and keep a good tenant.

11 Types of Common Notices for Managing Rental Property

Managing a rental property involves knowing when to send out notices in order to communicate with tenants and protect yourself legally as a landlord or property manager. Whether you have a tenant who has failed to pay rent or need to let a tenant know about upcoming renovations, it’s important to familiarize yourself with the types of notices property managers and landlords send out.

1. Notice of Repairs – This type of notice informs tenants that repairs or renovations will be made on the property on a certain day. It also lets tenants know about any outages that will occur, such as having the electricity shut off.

2. Notice to Enter – With this type of notice, landlords let tenants know that they will be entering the property. Whether landlords are doing an inspection or checking on repairs, most states require this notice to be sent to tenants at least one day before visiting the property.

3. Notice of Lease Amendment – This notice informs tenants that there has been a change to their lease. If the change was negotiated between the landlord and tenant beforehand, this serves as a formal document stating that the lease has been amended.

4. Notice of Rent Increase – This type of notice announces an upcoming rent increase that will take effect on a certain date. These notices must be sent to tenants between 30 and 60 days before the new rent takes effect, depending on state laws.

5. Offer of Renewal – This notice lets tenants know that their lease will expire on a certain date and provides them with a renewal offer.

6. Notice of Non-Renewal – With this type of notice, landlords let tenants know that their lease is set to expire on a certain date and will not be up for renewal. It also includes a date by which tenants must vacate the property.

7. Unconditional Quit Notice – With this type of notice, landlords let tenants know that their lease is being terminated within a certain period of time for a specific reason, such as illegal activity or major property damage. Tenants do not have the opportunity to remedy the situation.

8. Notice of Intent to Dispose of Abandoned Personal Property – This notice announces that tenants must pick up their personal property or it will be disposed of. Some states require advance notice, such as 30 days, while others do not.

9. Notice of Returned Payment – This notice informs tenants that their rent payment was returned due to insufficient funds. It also typically includes a returned check fee that the tenant is responsible for paying.

10. Notice to Pay or Quit – This type of notice gives tenants a certain number of days to pay rent that is overdue or risk having their lease terminated. The amount of time you give tenants to pay up varies by state.

11. Notice to Cure or Quit – This notice gives tenants a certain number of days to fix a violation, such as having pets that are not allowed or unapproved roommates, or risk having their lease terminated. This only applies to violations of clauses or conditions included in the lease agreement.