5 Ways to Supersize Your Profits – Part 2
In Part 1 we discussed the first 2 strategies to get more profit from your existing portfolio of rental properties. In Part 2 we will uncover 3 more fantastic strategies to supersize your profits.
3. Furnish Your Rental Property
If there is no possibility of a secondary suite, a furnished rental can be an excellent solution for extra revenue. Your ideal target market is foreign/out of town consultants for companies , temporary/seasonal workers, university professors and of course students, all requiring a furnished house, suite or room.
Clearly there are varying degrees of how ‘deep’ you can get into this strategy, but once you have created a solid niche in the local marketplace, this can be quite the cash cow. Often people charge double the market rent or more for furnished properties.
To understand the potential demand in the area, you need to test the market.
To accomplish this, place ads on Kijiji or Craigslist for a furnished house or a furnished one or two-bedroom suite. By the response, you will know if this is a viable option. Also, try calling larger companies directly to see if they employ out of town consultants for six months to a year or more, who may be interested in a house rental as opposed to a hotel room. In the end this saves the company money and is often preferred by the renter as they feel more ‘at home’ while out of town.
Once you have determined a need for the furnished rental, you can begin buying furniture. You can get a lot of excellent quality furniture and appliances on sale or used on Kijiji or Craigslist. You will need to create simple, clean rooms decorated tastefully, making sure that you pay attention to colour schemes etc.
Remember, you are creating a ‘home’ for someone so it is important to be tasteful… don’t just throw together a bunch of cheap unmatched furniture. It’s like staging a house for re-sale except you own all the stuff. If you take your time and source out good used places, you can do this in an affordable manner and the rent you can command will pay off this expense in no time.
4. Get Creative with Rental Ideas
You can make more money on a property simply by charging for some amenities. For instance, a coin operated washer/dryer can bring in extra income. These can be rented from a company that services them or you can buy them outright.
Another item which often is overlooked is renting out the garage. This can be rented to a tenant on the property or to a third party who may need to park a classic car, a boat or even an RV. I’ve seen garages rented to people who use it as a workshop.
Depending on where your property is located in the city, there may be a demand for parking. You may have a spot which can be rented out weekly or monthly. You can be competitive by charging less than the commercial lots and still generate a reasonable income.
Given the varying property types and locations, you can rent advertising space on the lawn, cell tower on the roof or even sign space on the side of the building.
5. Consider Rent to Own
This can be done using any property make-up but is typically utilized in single-family homes. This strategy allows a person or family to rent the home from you for an agreed upon term and then buy it from you at the end of that term.
The rent to own creates more income for you and also drastically decreases the property management necessary on typical rental properties. There are a number of particulars and differing vernacular in the rent to own (RTO), or lease option as it’s also known, depending on who has taught the process, but the overall concept is as follows:
1. tenant pays a purchase premium upfront (most landlords ‘bank’ this for the tenant to be used later as a ‘credit’ towards the purchase price upon completion at the end of the term)
2. tenant pays market value rent
3. tenant pays a ‘fee’ or an ‘option consideration’ or an ‘additional downpayment’ or an ‘instalment’, which is an amount above the rental amount (most
landlords ‘bank’ this for the tenant which is used as a ‘credit’ towards the purchase price upon completion at the end of the term)
4. tenant pays for all utilities (and even property taxes in some cases)
5. tenant takes care of any small repairs
6. tenant must pay rent on time or they may lose their option to purchase the property, and the extra ‘fee’ amounts would be lost as well. This is pretty drastic for an occasional late payment. A preferable idea for a late payment is: once they ultimately pay the late payment, the extra ‘fee’ amount is forfeited
7. at the end of the term, the ‘banked’ money is credited to the purchase of the property and the tenant buys the property from you The purchase price is often determined at the beginning of the term and is calculated by ‘comparables’ which depict the average of the historical three-year appreciation of the area.
The future price is determined by projecting that same appreciated value by the number of years the term of the contract needs to be. The length of the term is based on the time needed for the tenant to save enough down payment, and have an adequate credit bureau to get approved for the mortgage.
Rent to own is most effective under the following circumstances:
a) the property is in a ‘family-oriented’ neighbourhood
b) property values are appreciating
c) the tenant has secure income but not favourable enough credit to initially qualify for a mortgage
d) the tenant takes the necessary steps to increase their credit in order to mortgage qualify and complete on the contract in order to buy the property.
The next time you are viewing a potential property to add to your portfolio, or just examining the ones you may already have, check and see if any of these ideas can be implemented to generate more income.
If you’d like more info, to find out about training/coaching or to learn about how you can participate in cash flow real estate which provide above average returns, schedule a free 15 minute call by filling out the form below. And we assure you, no pressure or sales will accompany the call. Look forward to speaking with you!