Whether it’s a 10-unit apartment building or a 150-unit building, there are always options for apartment owners to increase profits and drive up the bottom line. However, in order to accomplish your goal of bolstering net profits, you must be willing to get creative. Here are a few ideas to consider:
Add More Units
While it requires an initial infusion of money, finding a way to add more rentable units within the existing footprint of the building is a great way to dramatically improve monthly profits. This is something real estate investor Gino Barbaro has made a habit of doing with apartment buildings and other multifamily properties.
“On our most recent purchase, the property had laundry rooms spread throughout. The rooms were large, and we began to consolidate the laundry and decrease the size,” Barbaro explains. “We were able to create three additional studio units from the extra space, which allowed us to increase our monthly revenue by $1,800 per month.”
Other options include taking storage rooms or onsite offices and converting them into spaces that can be rented. If the building has a basement with proper egress/windows, there’s also potential for creating income-producing square footage in this area.
Hand it Over to the Professionals
On the surface, it would seem like DIY property management is the most cost-effective option. (After all, it reduces overhead and allows you to keep 100 percent of your net profits intact.) But in reality, working with a property management company is almost always going to increase your profitability.
Take Los Angeles Property Management Group as an example. They recently helped a client get an $11,000 check from the city of Santa Monica simply by investigating the cause of leaks. They also helped re-pipe a building for 30 percent less than what the building’s owner was about to pay his personal plumber. On top of that, there are benefits like more strategic accounting, improved cash flow from better rent collection processes, etc.
With a few simple fees, you can easily increase your monthly revenue without having to raise rent. Two common options include:
- Late rent fee. Having a late rent fee is not just a good practice for incentivizing people to pay on time. It can also be a useful way to increase your income. For example, let’s say you have a 20-unit building with a $25 fee for every day the payment is late. On average, you know you’ll have at least two tenants who are two days late per month. That’s an extra $1,200 in annual income that requires zero additional work.
- Pet rent. If you’re going to allow pets, you should absolutely charge a pet fee. A small monthly payment (along with a non-refundable upfront deposit) can generate thousands of dollars in extra income per year.
- Offer Add-Ons
Too many fees will run off good tenants. But if you really want to maximize income, you can also offer add-on services. The beauty of add-ons is that they’re optional. This allows you to generate income from people who want the extra service, without ostracizing those who don’t. Here are some examples:
- Laundry service. Laundry is always a hot commodity in a multifamily property. In a typical apartment building, coin-operated laundry machines are the way to go. If you own a more upscale building, you could start a laundry service where tenants simply drop off their clothing where it gets washed and folded for them.
- Storage space. In a small apartment building, space comes at a premium. Offering onsite storage is a great way to generate more income from your existing tenants.
Get More Meat Off the Bone
If you’ve ever carved a turkey at Thanksgiving, you know that there’s almost always a way to get more meat off the bone. And just when you think you’ve gotten every last sliver, there’s more meat hiding behind a leg or beneath a wing. When approached with the proper angle and precision, you can access (and enjoy) it.
The same goes for rental property profits. You might think you’ve hit a property’s “ceiling” of potential, but there’s almost always something you can do to get more meat off the proverbial bone.
Whether you take the approach of increasing income or reducing expenses, seize these opportunities!