Earn More Revenue from Existing Rentals

Sure, you can spend money to buy another property, but wouldn’t it be smarter to spend less for the same return on your existing properties? Many real estate investors that hold rental properties are of the mindset that in order to generate more revenue they must purchase more properties. While that thinking could work (mathematically speaking), there is another train of thought on the subject. Let me explain.

Recently I was talking to a real estate investor contact (I won’t share his name, and he is probably reading this now), and during the pleasant conversation he mentioned that he is currently focused on conducting improvements to increase revenue (higher rents) on his existing units/properties rather than hunt for a new purchase.

I found this intriguing and asked him to explain. He mentioned that he could conduct some interior improvements to “update” the unit/property and in turn be able to pull higher rent, either from the existing tenant or a new one. Rather than invest funds (his or borrowed) into a new property being added to his portfolio, he was investing less funds into updates on his existing properties for about the same return. Seemed smart – more revenue without more headaches or management. By the way, he still has one eye open for a “steal” to grab if it appears on his radar.

During that conversation I was reminded of another that I had years ago at a local real estate investor club meeting with a long-time landlord of several hundred units/properties. He had, what I thought was a unique approach to interacting with his tenants. One way was that he DID NOT refer to them as tenants. Instead he referred to them as Residents. He felt that this term sounded more positive and offered respect.

He would survey his residents as to what adjustments they might like to see in their unit or home as he referred to it. He would supply a few examples such as: ceiling fans, one-touch kitchen faucets, instant hot water heater, keyless entry locks, smart home technology, large/high pressure shower head, etc. Note that pretty much none of these amenities are major improvements to the home and can be rather easily obtainable.

He then would follow up with them and discuss their “wish list” of amenities. In doing so he would help them understand that with each selected amenity came a monthly fee that would be added to their current monthly rental payment. The fees typically represented the cost of the installed amenity divided by 6 or less. In other words he was recovering the cost of the installed amenity within 6 months or less. The resident was happy as they received their amenities to make their home more comfortable for them. He was happy because he gained additional cash flow from the existing tenant(s) and recouped his out of pocket cash very quickly. By the way, since often multifamily rental properties are valued by their income, rising the income could also increase the property value. Smart play.