As costs for goods and services continue to rise and interest rates climb, landlords are working harder at finding ways to maximize profits and cut costs to continue to be able to offer affordable housing.
Likely you’ve been finding ways to meet your financial goals and obligations but if you need a few tips and a spark of inspiration, let’s take a look at some common and a few out-of-the-box ideas to help improve your bottom line.
How Can Landlords Maximize Profits?
- Improve efficiencies
- Cut expenses
- Charge for reimbursable items
- Increase prices to meet market rates
- Offer paid services and amenities
Likely you’ve tackled the first few items on the list already but if not, here are a few tips and suggestions to help:
One — Improve Efficiencies
Because improving efficiencies can cover many different aspects of your business, you’ll want to consider automating tasks and using time saving tools such as property management software. Here are some resources to help you streamline your processes and improve efficiencies in your rental business:
Time Saving tools you’re Not Using
Two — Cut Expenses
Improving efficiencies is a clear way to cut expenses in general. But here are a few other suggestions:
- Cut down on office supplies by working towards a paperless office.
- Never shop for supplies, hire services, or utilities without first doing price comparisons and negotiations.
- In fact, if you already are working with suppliers and vendors, don’t be afraid to renegotiate for better prices now. Let them know that you are reviewing your budget and looking to cut down on expenses.
- Ask for what discounts or services they can offer and if they have a rewards program. You never know, they might be able to provide free or discounted delivery, bulk discounts, or free product or services.
- If you are using credit cards for purchases, look into ones that offer the best cash back rewards. Many larger retailers offer many incentives if you use their branded credit cards that not only cash back rewards but also offer interest free savings.
- Look into seasonal energy efficiencies to reduce your utility costs.
Learn More about cutting energy costs here: 7 Energy-Efficient Ways to Cut Costs This Summer
Three — Charge for Reimbursable Items
In many cases, you may have been paying for services and resources without asking the tenant or property owner to foot that bill. You may offer them free to set yourself apart from the competition or decide to charge a fee to reimburse your costs. Here are a few items you could be getting reimbursed for:
- Key replacement fee when duplicates are requested
- Tenant screening by charging an application fees
- Tenant damages during tenancy
- Charging credit card transaction fees for the convenience of paying by credit card
- Property management companies could charge owners for lock changes during tenant turnover
Note: Before charging credit card convenience fees, ACH online processing fees, or application fees, be sure to check Federal, State, and local regulations. In some states for example, there are specific application fee rules and limitations on amounts you can charge.
Four — Increase Prices to Meet Market Rates
If you haven’t looked at your pricing in awhile, it may be time to do a little market research. You could increase your market rents for new tenants and increase your management fees for new clients.
For lease renewals, you’ll want to weigh the pros and cons of each price point change. Having a great tenant renew at a smaller increase is better than having your property sit vacant a month or two while you find a new renter at a higher rate.
Same is true for management agreement renewals – it’s reasonable and expected that rates will increase but stay within the competition and make sure to offer great service and resources like an Owner Portal and self-service reports to justify the price change.
Five — Offer Paid Services and Amenities
Finding ways to increase profits by adding paid services and amenities is likely something you might not have considered in the past but with todays costs rising, creativity in revenue streams could be a great way to keep your housing prices lower than the competition while still bringing in additional revenue.
Not to mention, adding services and amenities (even paid ones) is a great marketing advantage over your competitors.
If you’re a landlord in that boat, searching for some ideas, let’s dive into some of the solutions to help improve your bottom line.
What to Consider Before Adding Paid Services and Revenue Streams
Don’t get caught up in chasing revenue without knowing the regulations or in the end, it might end up costing you more in fines, fees, or worse.
With any suggestions above or below, be sure to check Federal, State, and local laws and regulations regarding Fair Housing, Permits, Credit Card processing, and other regulations prior to implementing your changes in fees, services, or amenities.
Ideas to Maximize Profits with Revenue Streams
Some ideas lend themselves to properties that are multi-unit or commercial over single family housing while other ideas will work regardless of the rental type.
Stand-alone property (House, Duplex, ADU)
Exterior Care Package: Lawn Care & Landscaping: If your lease requires that the tenant provides routine yard maintenance, consider offering a paid opt-in service.
Of course, be sure in your lease to put in detail your expectations in terms of grounds keeping such as watering schedules, mowing, trimming, weeds, power washing, etc.
In your lease, you’ll also want to note the cost they will incur if they do not maintain the exterior of the home to your standards. Those details may encourage them to buy into your exterior care package.
Multi-Unit Properties (Quad-Plex, Apartments, Mobile Home Parks, etc)
Vending Machines: You can either purchase, stock, and maintain vending machines yourself or outsource and share the profits. Vending machines are not just about soda and junk food – you can provide access to a plethora of choices from convenience store items to pizza. The possibilities for vending options are limitless.
For example, it would be very convenient for your tenants to run down to the vending machine for batteries and laundry soap instead of jumping in the car to run to the store.
Laundry Services: Speaking of laundry, have you considered providing laundry services onsite? Can you convert a storage area to a laundromat? If you already have laundry machines, consider the costs of upgrading to more energy efficient machines, coinless machines, or outsourcing for profit sharing.
You can find landlords discussing this topic in the BiggerPockets Forum here: Multi-Family and Apartment Investing | Approach to multifamily shared laundry rooms
Concierge services: It might sound like a luxury but many renters are willing to pay for concierge services if it makes their lives easier. You could offer dog walking services, running errands, packing and unpacking services, and more. You might have to hire some part-time help on a per project basis so make sure your fees for services cover those costs.
Extra parking space and storage: These days, many tenants choose to also rent off-site storage units. Why send those funds to another landlord? If you have the space, you might consider creating additional parking and storage spaces to rent out to your tenants.
All Residential Properties
Pet fees: Allowing pets in your rentals is a wonderful way to attract tenants and can be profitable for you in the long run. Charging a small pet deposit and a monthly pet fee can help you have those extra funds needed to mitigate any pet damage to the home and yard and increase your overall revenue.
Appliance rentals: Of course, appliance rentals can help reimburse your purchase and maintenance costs for appliances. College students, first time renters, traveling nurses, military, and others might benefit from renting appliances from you so they don’t have to purchase them outright.
You might have the perfect home available but the perfect prospect might not have a washer and dryer or refrigerator to bring with them – you can be the hero and provide them for a small monthly fee.
Furniture, appliance, and equipment rentals aren’t just for residential tenants, consider those options for your commercial tenants as well.
If you haven’t considered it before, you could initiate a Net Lease where your commercial tenants (lessee) pays a portion of the shared property expenses. There are single net, double net, and triple net leases depending on what they are required to pay a portion of such as taxes, insurance, and property maintenance. A Triple Net Lease (also known as an NNN lease) would include a fee that goes towards all three (taxes, insurance, and maintenance).
Additional Business Revenue
Advertising: Consider renting ad space in your newsletters and on your website to vendors, contractors, service providers, local shops and restaurants, delivery services, and more – that your tenants can call on for their needs. It not only can bring you extra income but also provides a service to your tenants by providing them with handy contact information.
Affiliate marketing: Affiliate marketing is connecting a recommended resource or product with your tenants, prospects, and clients. If they choose to view or purchase from your recommendation you receive a small commission for that connection. Many companies these days, from small suppliers to large big box stores, offer an affiliate program.
Increasing revenue doesn’t simply mean raising your prices but can include creative ways to give your renters what they want and are willing to pay in added services and amenities. Remember, adding revenue streams aren’t the only way to increase your bottom line, increasing efficiencies, cutting costs, and reimbursements can also help.