You are so happy!
You got a super deal with your latest multi-unit rental property acquisition.
Thanks to the neighbouring landlord who was retiring.
It’s all set up now. The property is in good condition, except for some wear-and-tear issues. They were all quick fixes. You got all units rented out at fair market rate.
Now what? Are you going to sit back and relax?
Well, you can, but you wouldn’t be very smart.
Your new acquisition provides you with many opportunities coming your way to make a solid extra income, a side-income.
But you have to identify them.
You’ll leave a lot of money on the table.
Can you really afford to do that?!
Here is the list of potential opportunities:
While Dealing with Tenants
The idea here is to increase your bottom line compared to the previous year. You can do that by increasing rental income and reducing the expenses.
While dealing with the tenants, you always look for the opportunity to increase rent. You have to keep looking for legitimate ways. You should not sound too greedy, which can create bad faith.
1. It’s An Anniversary, Go Raid Them All
Rent should be increased every year at the anniversary date of the tenancy. It’s to keep up with the increased cost of expenses like property taxes, repairs, insurances etc.
If you don’t increase the rent your bottom line may come down because of the increased overall cost. And you wouldn’t even notice. It’s also important to increase the rent every year to keep up the pace with the market rent.
Caution is advised while increasing the rent. Some cities and some provinces in Canada have laws restricting the rent increase in place. The tenants also don’t like rent increase. The prudent approach is to show them proof of the increase in property expenses.
2. Don’t Miss The Opportunity At Tenant Turnover
Whenever an existing tenant leaves and the new tenant moves in, the rent should be increased.
In most states, this is the only unregulated area where there is no restriction on what rent you can ask from the new tenant. It’s guarded by the supply and demand forces of the rental market.
Try to charge maximum rent, based on the market condition and condition of your property. Aggression is paramount if you want to earn a solid side income without any further investment.
3. Charge a Flat Rate For The Utilities
If your property does not have separate meters, 2 steps are imperative.
- Charge flat rate for the utilities. This is to save you from extra administrative cost and time. Think about keep sending all the utility bills(heat, electricity, water, cable etc.) separately and then collecting those amounts separate from the rent. This can be full of hassle.
- You should have a condition in the lease to review the actual bills periodically and adjust the flat rate accordingly. This is to save you from the abusive use of energy by a vindictive or careless tenant.
You may also charge rent which is inclusive of the utility bill. But it may appear higher than the market rent.
Check the Landlord and Tenant laws and how it allows you to increase the rent if the utility is included in the rent.
4. Don’t Let Them Park Without Paying
It starts with the rental advertisement which you publish. The scrupulous landlord never forgets to mention in the ad that the parking charge is extra.
If your rental property is in the busy area or in the mixed business area, you can make lots of money renting out parking spots.
You should keep looking for opportunities like Uhaul dealership if you have a big parking lot. Nearby sports arena also provides you with a significant source of parking income to add to your side-income.
5. Pets Are Not Free
This is another one that needs mention when you publish the ad. And if you forget to charge extra something for a pet, this may turn out to be a very costly affair for you. You may run into the dispute with the tenant at the end of the tenancy or you’d pay a clean-up cost.
Over the years, I have observed, tenants would keep it nice and clean if they are paying something extra for pets. Most landlords charge a deposit and small monthly amount as a pet rent.
Caution is advised as pet deposits are illegal in some provinces in Canada. Please check your state or provinces law for tenancy.
6. Fire Your Property Manager, Get an Overseer
Property managers are responsible for the entire rental operation. This includes everything from finding tenants and collecting rent to property maintenance and repair issues.
But if you are a DIY Landlord and live at a convenient distance from your property, you may not really need one. Instead, you could take the cheaper option and find an overseer among the tenants who keeps an eye on your property and reports to you.
Obviously, this costs way less than hiring a full-time property manager, so it’s your opportunity to save money and add to your profit.
Discretion is advised in choosing the overseer who is also a tenant. It’s a tricky proposition to mix up the tenant’s paying position with overseer’s paid duty. This option may not be suitable unless you are an experienced landlord.
7. Their Guests Are Not Yours, Charge Extra Rent
When a guest stays overnight, it incurs utility cost with the activities like cooking food or taking a bath. Even if the tenant pays his own utility, you should have some limits in place on how many days you’d allow guests.
More often than not, you’d come across the tenant abusing the privilege of guest allowance in the wake of the restriction.
A better way to deal with this tricky situation is to put a condition in the lease with the tenant. They can invite a guest, but for an extra cost. Be reasonable. You should not sound very greedy. Try to find a balanced approach. For example, you may allow a guest just for 4 nights a month for free.
While Maintaining Your Rental Property
You’d want to reduce the cost of regular or unforeseen maintenance tasks to save money on overall expenses and increase your bottom line.
8. Pay a Regular Visit To Avoid Unforeseen Expenses
As a landlord, you should always keep a watchful eye on your property. That would save you from unforeseen maintenance cost.
That’s the reason I always visit my property to collect rent in person. Even if your rental operation is running smoothly, you are able to take a round of the property once a month on the rent collection day.
I prefer to schedule it on Sundays. So that way you try to meet up your tenants. I send them the notification by text or email. If someone is busy they can notify back. If a tenant is busy every time(keep avoiding you), that’s a good case to keep an eye on. Over the years, I have found this as a good practice.
9. Preventive Maintenance May Save You Lots Of Money
There are a few important maintenance tasks you want to do at a regular interval. You’d invite trouble and extra cost if you don’t pay attention here.
- Check for Pest issues, before your tenants report to you
- Check the roof for any damages
- Clear eaves and eavestroughs for dirt and leaves before winter
- Make sure any water dropping from the top drains away from the property
- Check fire and CO alarm more frequently
- Replace air filters in the furnace every 3 months
- Make sure any tenant is not violating a lease condition
These preventive maintenance tasks may save you a huge amount of money and hassle. These issues have the potential to disrupt the whole landlord operation. So don’t ignore it.
10. Earn a Windfall With These Protection Plans
Both in the USA and Canada, there are multiple companies providing the protection plans for heating, plumbing and electrical repairs. Homeserve in the USA and Reliance Home Comfort and Enercare in Canada are examples of such companies.
They charge a monthly fee for the protection plan. These are extremely useful and cheap repair options.
As illustrated in the above image, this home protection plan costs $32/month. The plan includes heating protection, cooling protection and plumbing and drains protection. If you are a landlord, you know it’s a huge saving!
Check out if for such services are available in your area.
11. You Can’t Save If You Can’t Bend Down
Once you become a landlord, you ought to learn some simple repair fixes. For example, think about replacing a toilet. You would be able to save $150-$250 if you do it yourself.
There are many tasks you can take up to add to your side-income. Check out this 100 Tasks you can do yourself.
12. Recruit Tenants for Handymen and/or Gardeners
If you don’t have the time or you don’t intend to do repairs and fixes yourself, look for the handyman among the tenant if that’s an option. Because of the personal relationship, you’d save something if not a lot. You may also have a quick and reliable fix because of your mutually beneficial relationships.
Gardening and snow removal are costly items. You should look for the retiree tenant who can do these jobs.
While Filing Income-tax Return
13. Don’t Forget Any Deductions At The Tax Filing
To keep the expanse record is more work than it appears. But it’s may make a big difference in case if you forget to deduct one of the bigger expenses. Or it may save you a big amount on the tax which you’re going to pay eventually. You have to be well organized so that you record all the expenses all year round.
- Advertising expenses
- Professional fees
- Legal dues
- Management expenses
- Repairs/maintenance & cleaning
- Office expenses
- Mortgage Interest
- Any other interest cost incurred because of property expenses
The onus lies on you to give your CPA the account of expenditures. Don’t forget you may have to provide the proof if IRS(CRA for Canada) asks.
14. Don’t Forget To Add Capital Expenditure
Capital expenditure is an investment in the property to improve it. Which go as assets on the balance sheet rather than as expenses on the income statement.
The Tax Department should know of the capital expenditure on your property whenever it occurs. If you forget this, you’d pay more capital gains tax when you sell. And is a net loss for you.
While Buying and Selling Rentals Property
15. Always Be Prepared To Grab Mouthwatering Deal
The experienced landlord would agree, this is the single biggest opportunity to make the killing.
- Always be prepared (financially) to buy.
- Always be looking for a good deal.
- Whenever you see a good deal, work aggressively to grab that.
If you are a new landlord with just a single property, this may be a hard proposition for you. But once you own multiple properties, you’d have mettle and resources to follow this strategy.
16. Keep Looking For Lease-to-buy Propertunity
This is a circumstantial opportunity. You may run into a landlord who wants to get rid of the property for whatever reason. The motivation of the seller can be anything. It could be from retirement to getting tired of handling tenant to profit. You may take over the property and install a new tenant. Once you are experienced landlord with lots of contacts, the opportunities like this may come your way often.
17. Seize The Cash Buyer
Sometimes, you’d come across a motivated buyer. Think about the scenario when one of your fellow landlords has sold a property and he is in need to buy another property as soon as possible for tax purpose.
That’s your opportunity to sell one of your less attractive property.
18. Install Coin-operated Laundry or Pool Table
No brainer. This is a very popular option among the landlords to create extra income. The coin-operated laundry is an essential facility. If your property is located in the affluent area and has a common area, you can install a coin-operated pool table.
It’s a value-addition to your property plus a side-income for you, a win-win position!
19. Provide Service That Tenants Love and Make Money
Depending upon the type and the area of your property, you would see opportunities to provide services like babysitting, dog walking, a maid on call or pool maintenance or loan mower.
I am not saying you should start full-fledged service at your property. You just have to partner with local service providers and make a commission.
20. Make Even More Money With Furnished Downtown Condo
If you own a condo or house in downtown, you may create an extra income from renting out a furnished house.
It’s higher rent for the furnished home. For the one time investment of furnishing, this may bring you significant profit if you own a property in business districts of big metros like New York, Chicago or Toronto.
It’s not difficult to estimate the rent of the furnished property from the information available on Craigslist or Kijiji.
21. Find Opportunities in Every Nook and Cranny
Landlords are notoriously aggressive in creating the opportunity to earn extra rental income. For example, experience landlords would try to split 1 apartment into 2, to earn more in the total rent. They would always on the lookout for finding or creating extra storage space in their existing properties.
Here are some examples of some(may require permission from the city) renting opportunities:
- Rent out the roof to solar companies
- Lease out easement right to utility companies
- Cell towers, new age opportunity
- Rent out a common area(for Yoga/Zumba training)
You are Smart, It’s a time be Smarter!
It happens with all of us.
When we close a super deal like the one you did, we get overwhelmed with the feeling of contentment. It seems like there is no need for further pursuit.
But Remember, every success is just another link in the chain to reach your ultimate goal.
The landlord business requires cash flow to run day in and day out. It’s not the time to sit back and relax.
The side-income generated from these strategies can make your business flourish even more. You’d never run out of cash. The cumulative effect of success will get you more involved than ever, which will be hugely beneficial in the long run.
Here is what you’re going to do.
Be more attentive to your everyday landlord operation. Keep looking where you can make that extra penny.
Be vigilant on how you spend on repairs and fixes. Try to save at every step.
Watch your cash flow account outperform your expectation.