Top 5 Ways To Increase The Revenue On Your Rental Properties

1. Increase Occupancy (Smartly)

Each month you have a vacant unit sitting you lose about 8.3% of the potential yearly revenue from that unit, which means that every month it sets vacant it starts to add up quickly. As soon as you find out that you will be having a vacant unit you need to do a market survey to confirm the current market rate on your unit. Have your lead maintenance person that does your final walkthrough prepare the list of repairs/maintenance issues (if any) as they do the walk through so they can order the needed material that day and they can be prepared to start the turn of the unit as soon as it becomes vacant. Once the unit is vacant begin placing your ads so that as soon as the crew has the unit ready for market you can show the unit immediately. Make sure your market survey is current allowing you to set the best price for your available units and know the specials (if any) that are working the best in your area, if you need to fill several units consider running an aggressive special to get your units filled but be sure you don’t give money away that you don’t need to. Always offer your residents a referral for bringing someone.   Most importantly listen to the market, if you are not getting interest in the unit, you may need to lower the price.

2. Raise Rents Smartly

Know your market rents, know how your property compares to the market and set your prices accordingly. I find that sometimes it’s wise to offer an incentive when raising rent, carpet cleaning or an accent wall can make the whole increase issue a lot more palatable for your renter. This method can also help if you have seen a minor decrease in rents as if the resident believes they can get a better deal somewhere else they may leave but if you make their home even nicer they may decide to stay put and not come out of pocket for the moving expenses. It’s also good to know about how much those moving costs maybe in case it gets brought up.  Make sure that the system you are utilizing sets reminders for rent increases are due, when leases come up for renewal and be aware of maximum rental increases allowed if you are in a rent control area.

3. Be Consistent With Late Fees

Keep in mind that you are running a business, if you don’t collect the fees that are due, you are leaving money on the table. Keep in mind that your residents will talk and if you decide one person can be allowed to not pay on time, or pay the late fee, you will most likely be hit up by more residents asking for the same.

4. Minimize Turnover

Turnovers can be expensive, the cost of turning the unit and advertising the unit can add up very quickly, and as mentioned before, one month of lost rent equates to an 8.3% loss in annual revenue for the unit. If you have a tenant that has run into some financial troubles you may need to work with them for a few months but don’t give too much and always make it work to where you receive all money that is owed. Some options are to add to the following month’s rent, add to the end of the lease, and be sure you are paid in full otherwise the residents may talk and you will get bombarded with requests for assistance.

5. Additional Revenue Streams

As you probably made this investment to make  additional money it makes sense that you look at all potential ways to make additional revenue, here are a few ideas.

1)      Extra storage

2)      Bike storage

3)      Charge for an accent wall

4)      Laundry rooms

5)      Vending machines

6)      Upgraded features/appliances in units

These are just a few ways that we at www.LLCPM.com  look at for every property that we take over and start to manage, remember the reason you got into this business was to either make more money or wealth preservation so make each day count!

The Effects of Overbuilding a City

Having been in the real estate business in Southern California for over 25 years I have seen a lot of growth and redevelopment that has shaped our wonderful cities, but I am becoming growingly concerned of all the development that is slated over the next few years.  I realize that a lot of the development is replacing our older properties that no longer serve their intended purpose or useful life, but I have to ask, how many more mixed use properties with luxury units on top does this city really need? In the case of Santa Monica, how many more boutique hotels need to be built?  I am in the real estate industry so I am all for a great new development that can enhance a community (if needed) and I am all for bringing an old tired property back to life but it seems we have a current mode of build for the sake of building.

Although most new developments require an environmental impact study, including increases in the traffic flow, I still question the long term effects on these cities allowing developments that may not be needed, or the current infrastructure cannot handle.  At a minimum this can lead to consequences, including traffic jams all hours of the day, an increase in crime, and pollution increases.  This can quickly turn a community from being a place that you want to live in to a place you just have to go and deal with.

The real estate cycle in Southern California is less damaging than other parts of the country so our investments tend to be less volatile.  However, when you have built more units than current demand dictates, you will have properties that will go dark and become an attraction for undesirable activities. Therefore, crime will spread to the neighboring properties.

I am an avid scuba diver and I have dived all around Southern California and when you are diving in our area’s beaches, you are amazed at the amount of trash that is already floating in our ocean. The added cars and population will only add to the amount of trash unless we figure out a process that we can help our environment.

I feel like I got on a bit on a soap box here but I am passionate about our cities and what we have created here and I hate to see over development cause damage. I know we have the opportunity to vote on some of these issues next month, so I encourage you to read up, get educated and head out to your voting place no matter your cause or position.

5 Critical Mistakes Some Property Managers Have Made

Property managers must devote several hours a day to managing their asset. With screening prospects, responding to tenant requests, hiring a maintenance team, collecting rent, accounting, paying bills, etc., committing mistakes are inevitable. Here are a few mishaps property managers have made:

Not Screening Potential Residents

The stories I have heard from managers that have chosen to not screen their potential new residents are dumbfounding to me, if you don’t know the history of an individual(s) you can put yourself in jeopardy by having them move into your community. To be safe you should at least run a background check and always be sure to check references (Work and last residences).

Hiring Unskilled Maintenance Members

I understand the desire to save money but hiring unskilled workers will eventually cost you more than doing it right the first time. Jobs completed by unskilled laborers will more than likely need to be replaced sooner, if not having to be completely redone by a skilled maintenance crew. Have it done right the first time.

Hiring New Contractors on a Regular Basis

When big projects arise on property and you reach out to get 3 bids every time in an effort to save money you are setting yourself up for bigger problems. While you are getting multiple bids, which will take days your issue on your property is sitting with nothing being done with it and residents/tenants are put out so the longer it takes the more likely you will also have resident/tenant complaints. The paper work you are created by going out for these bids every time will also take a lot of additional time. We always recommend building a team around you, find a great plumber, contractor, roofer and have them be your go to people.

Letting Tenants Fix Their Own Maintenance Problems

Unless your resident/tenant is a contractor we would never recommend letting them do the work on your investment property. If you don’t have a maintenance person on staff hire someone that you know can do the project correctly. Also, if you allow your tenant to do the repairs, I would bet they will find additional repairs that need their attention.

Not Doing a Routine Property Inspection

Walking each unit/office regularly needs to be a part of your program regular routine, create an inspection list so you can track repairs that need attention. Also, you should know your residents/tenants and coming onto their home or office is a great way to get to know them.

While not all managers make mistakes by managing their properties themselves, others unfortunately run into problems. Avoid making these mistakes by spending valuable time making sure you manage your asset maintains its shape or by hiring a reputable property management company whose full-time job it is to monitor investor’s properties, hire employees / contractors and screen potential tenants. A property management firm has the time, knowledge and experience to make the best decisions for your investment.

Should You Consider Real Estate Investment Trusts?

By Joe Killinger

Pulling the trigger on your first real estate investment is daunting and not everyone has the risk appetite to go it alone. 

If you want to start investing but don’t want to take a leap of faith, you may want to consider a Real Estate Investment Trust (REIT).

A REIT is an investment vehicle that can invest in any real estate class and they’re operated by experienced executives. The benefit of investing in a REIT is that you do receive some of the benefits of real estate ownership/investing, but you have seasoned professionals managing the properties. 

Since you’re really buying stock in the company, your investment is spread out over a portfolio of properties along with other investors, which helps to mitigate risk.

REITs are required to pay out substantially all (90%) of their taxable income and most pay above-average dividends, so consult your CPA to see if this may affect your tax position. Of the 172 publicly traded REITs listed on the major U.S. exchanges with market capitalizations greater than $500 million, 94% have higher dividend yields than the average S&P 500 company.

REITs are excellent stocks to add to any long-term investment portfolio. Not only are REITs income generators, but as property values rise they have the potential to produce some impressive returns over time. Similar to when you look for your own properties, you need to look into the assets that the REIT has that has an interest in buying.

Due to the strong dividend income REITs provide, they are an important investment both for beginning investors, retirement savers and for retirees who require a continuing income stream to meet their living expenses. Instead of worrying about managing your property you simply can look over your monthly statement and monitor the management team and the assets they are investing in, REITs aren’t boring, steady investments. On the contrary, they sometimes go up and down in a big way, and move sharply in and out of favor with investors.   The main negative of investing in a REIT is that you really have no control over the investments, or when they sell off a part of the portfolio, you are trusting the managers of the REIT to do this for you.

REITs can be a great way to get yourself knowledgeable on real estate investing and is a relatively safer investment than jumping into a Flip or smaller investment and learning how to manage your investment.

Also, check out the below article on how to start investing in real estate.

The ultimate beginner's guide to investing in real estate