Whether you have owned your property for a while or just taking it down today, there are many ways of boosting revenue. Keeping an eye out for opportunities to increase income is not only important to cash flow, but also to improve the overall valuation of the property.
Here are my 5 ways of boosting the revenue of your multifamily deal:
Reduce Turnover: One of the best ways of reducing expenses is to keep your turnover as low as possible. Churning through tenants increases your costs simply because you need to turn the unit every time they leave. Even if we are talking cleaning, paint, or a carpet cleaning, you have to hire the contractors, plan, and do the work. You then need to advertise and qualify the incoming tenant. This can shave weeks or even months off the income for that unit.
You want to carefully underwrite the tenant almost the same way you underwrite your deals. You want people that will pay consistently and have a good background. The right tenant will also take care of the unit and will not disrupt others. Also, by employing what I call “attentive property management” you can keep the tenants happy and cash flowing. This means tending to problems reported by the property manager and showing you care about the tenant. Sending birthday and holiday greetings goes a long way to letting them know you appreciate them.
Increase Rent: This is an obvious way to increase revenue, but it must be handled carefully. You must analyze the rents in the area as well as the amenities of your competitors. If your units do not have the same finishes or upgrades as the units in the local market, there may be an opportunity for you to improve the units and bump rents. Keep a close eye on the economic cycle as well. If your region of the country or city is beginning to experience a slowdown, you want to make sure you can make the improvements and still increase the rents.
Regular maintenance is important to increasing rents and sustaining the investment in the property – all while creating value for the tenant. If you are planning to add a stainless steel microwave or replace one of the major kitchen appliances, you may choose to coordinate the replacement with the lease renewal so the tenant sees the value for the additional bump in rent.
Fees: There are several fees you can apply to a tenant, always being careful not to cost yourself out of a tenant. In some markets and asset classes, you can get away with charging an application fee. Additionally, you can also charge a non-refundable pet fee of $200 at the beginning of the lease, for example, along with a small recurring fee of $10/month for small pets. There are also late fees, but you need to be careful that this is not indicative of a larger issue the tenant is having in their life, like a job loss. Not charging them tells your tenant that its okay to be late, so make certain you do this. If you are renting individual rooms, you may choose to charge a “roommate change out fee”, which would include an admin and re-application fee of the new tenant. Something similar to this is a “lease change fee” for replacing someone on the lease or for subletting. Talk to your attorney about applying these fees in your area and the language to add them to your lease.
Vending: Selling everything from snacks to toiletries to tenants is not only a convenience for them but can drastically increase your cash flow. In some properties, I’ve seen vending machines that sold cold sandwiches and fresh fruit next to a machine that sold hot entrees. Those machines were set up in a senior housing apartment. In other places, I’ve seen laundry detergent, dryer sheets and even toothpaste sold in these machines. Be careful of where you place these machines as you want to make it easy for tenants to get to, yet not disturb others for tenants that are looking for a midnight snack. Also, make certain you have cameras on the vending machines as well.
Other Services: Depending on the asset class, you can offer a host of other services such as house cleaning. You can work with a house cleaning contractor and put in a bump so you make a profit. You can hire a cleaning service to come and clean the unit for $50 every two weeks while charging your tenant $175/month for the service. This increases your revenue by $75/month or $900/unit annually. Another option is door side trash pick up which is a great amenity to add to your apartment community. It helps better secure the comfort of your tenants stay and add to the value of the property.
Anyway, here are my 5 of ways to boost the ROI of your property while improving the overall valuation of your investment. What are you doing to find additional revenue streams in your properties? Let me know in the comments. If you like the content, check out our podcast on iTunes and Stitcher and subscribe to the new YouTube channel. We are working on getting new content out all the time to help you build your success in the world of multifamily.