Are you flushing money down the toilet?

Here's my latest comment to Brandon Turner's great blog post 3 Simple Landlord Mistakes Costing You Big Money

I'd highly recommend you read his post to gain some insights on how to improve your annual cash flow.

In my opinion, too many investors focus on the purchase rather than the day to day operations of a property.

Yes, I love chasing a deal like the rest of you. Yet, when you think about the true value of a property, it's all about the future cash flow stream.

Let's take a look at one of the easiest ways you can boost your cash flow without having to resort to rent increases, refinancing, or reefer ( if you live in Colorado).

One area that I see landlords throw away hundreds and sometimes thousands of dollars a year is the toilet.

Yup…..landlords are literally flushing money down the toilet.

In my area, water runs about $10 per unit from the local utility company. An average person uses 3 units per month or about $30 per month of water before the city tacks on all the other various fees-sewage, local taxes, etc.

Over the last couple of years, I have acquired a few multifamily properties where the water use was averaging anywhere from 40 to 60 units per month. As soon as I purchase each one, I immediately started replacing the toilets with low flow American Standard Cadet toilets from Home Depot. These run about $140.00 each.

This, along with replacing drippy faucets or adding aerators, typically results in a 50 percent water savings. Thereafter, I monitor water usage each month and immediately address the problem whenever I see the water usage spike upward. Nine times out of ten it’s due to a running toilet.

Here’s where it gets interesting.

On a 8 unit purchase from December of 2012, the water bill average $500.00 per month. It’s down to $250 per month now and has stayed this way for more than a year.

Taking this one step further (for all the muti-family geeks out there) I’ve added another $3,000 in cash flow. Throw in a cap rate in my area of town of 9% and I’ve raised the value of the building by $33,333 in very simplistic terms.

Note: The real number would be lower due to other appraisal factors- maintenance, vacancy allowance, etc.

Bottom line, the seller was literally flushing $30,000 a year down the toilet before I helped him get rid of his headache property.

The next time someone gripes to you about the 3T’s (tenants, toilets and taxes), just smile and think to yourself how grateful you are for fellow landlords who don’t know how to capitalize on these three issues.

Now, get off this site and go buy a property!