It’s seldom going to be a single thing that captures ten thousand dollars in added revenue from being a property owner or being in property management. It’s always going to be a collection of things that add up to that. And it can be substantially larger.
[00:00:21] It’s always going to be a collection of things that add up to that or in larger dollar amount. And it can be substantially larger. But we use $10,000 dollars as a placeholder because anyone finding an extra $10,000-dollar bill in the course of a year that’s probably a significant event. Of course, you can always scale it up for larger assets. Let’s go through our list and identify for you 10 potential ways to find an additional ten thousand dollars in revenue from the properties that you already own.
[00:00:56] What if you could increase revenue with each of your assets by an additional ten thousand dollars a year? What does that translate to in terms of total revenue, fees and property value?
[00:01:07] Consider an increase of just five thousand dollars a year in net operating income (NOI) and impute a 6 percent cap rate on that. That increases the value of an asset by $83,000 dollars! So even though we’re talking about small dollars in reference to five and ten thousand dollars in revenue, if that same 5 and ten thousand dollars can convert to NOI at that same level then we can see a material impact on the value of our assets. That’s just one $5000-dollar bill if it’s NOI.
[00:01:41] When people find money it’s usually in small increments like a jar change or a loss five or ten-dollar bill in a pair of jeans. Following our ideas for finding ten thousand dollar bills at your property. Some of these ideas can produce $10,000 dollars all by themselves. Some may reduce your cost and drop additional cash into net operating income.
[00:02:09] In the real estate rental income business there are no magic bullets, however, savings and revenue are sometimes right in front of us. In this episode, we’re going to dive deeper into some of these possibilities.
[00:02:24] We just have to look. Sometimes they’re right in front of us and sometimes we do have to peel back a few layers just to see them. Let’s talk about professional athletes for a minute. They can seldom point to just one thing that they do that makes for their success. It’s very often many small things that accumulate over time that create their high achievement. This same frame of thinking applies to property management. Presented here are 10 suggestions for finding an additional $10,000 dollars on property.
[00:03:00] The first one is answering every phone call because every phone call is a potential lease. Large real estate investment trust or REITs have proven that by answering every call that directly impacts revenue generation to the tune of 1 to 2 percentage points per year. So, multiply your current annual rental income and increase it by 1 to 2 percent per year just by making sure that every telephone call is answered by a real person.
[00:03:35] Secondly, enforcing late fee collections. I know that people are kind of all over the map on this. Some people, some management companies take it to the extreme but just enforcing the existing policy can have a positive impact on revenue without alienating residents. If you have a policy in effect, then follow that policy. If you do not have a policy in effect, then place one into effect. Put a late fee policy into your leases and utilize that to the letter that it is described in your lease. You don’t have to go overboard but you also don’t need to back down from what the lease states.
[00:04:17] The third one is just thinking time some time property management and/or ownership just needs to stop and think a little bit about what we can do better with an asset. We get ideas from those that know the property the best. That would be you the property manager or you the owner. Have a brainstorming session with the people that run the property, with the people that lease the property or with those that are doing maintenance. Make it a fun event. Maybe have some food. We wanted to be a productive short productive session. Set aside a half an hour to an hour. Make it a fun event where people are relaxed and are in a position and willing to tell you the things that will have a positive impact on the property.
[00:05:09] Number four is increasing On-Site coin operated fees. If you have on site laundry or a coin operated machines on the property think about bringing those up to market rate versus leaving them where they are. Even if it’s something as small as 25 cents in an increase for laundry, as an example, or wash and dry. If it’s a thousand loads per month going through there that’s $250 dollars in added monthly income just by increasing rates by 25 cents per load.
[00:05:44] Number five is charging monthly pet fees. This is not necessarily controversial but it works in some areas across the country better than others. It’s just a matter of if you want it to become a common practice. A lot of a lot of companies, a lot of owners, just charge a one-time fee. But for those residents that reside over several years then you’re not maximizing that fee amount. Charging a monthly pet fee allows you to increase income incrementally while not making it an overt fee but one that can be implemented across the board across the property across the portfolio that will also increase revenue for your assets.
[00:06:30] Early termination fees as number six. Most leases have a termination fee of “something” but if it’s allowable in your state think about maximizing this from one to three months’ rent for a lease break fee. If you don’t have early termination fees in your leases at all then now’s the time to add them because it will have a positive impact on your income for the property.
[00:06:58] Number seven is to review existing loans for refinance opportunities. Here’s where that $10,000-dollar number, in terms of added revenue, can be exponentially higher even on a small property. If you refinance X and your payments are reduced by 5, 10 20 thousand dollars per year that is a wonderful event but one that won’t occur unless you look at it. In our business plans for property we look at opportunities to refinance at least annually if not more often. You want to put that into your frame of thinking to review existing loans and to see if there is a refinance opportunity that can be a positive event where your asset.
[00:07:48] Number 8 is utility auditing or sub-metering. This is a whirlwind business, one that’s increasing its reach in rental property all the time. Just do a google search under utility audit or some metering or RUBS system, (renter utility billing system) and see if there’s some things there that makes sense for you to pursue.
[00:08:14] Number nine is energy efficiency review. I put this a separate from sub-metering because were energy upgrades that you can accomplish at your property may not have anything to do with utility billing. It may just be replacing lighting, repairing roofing, windows, insulation, adding a consistent change-out for air filters or whether strips. I know (stop rolling your eyes) it’s very boring stuff but that energy efficiency review can have a positive impact on the property by reducing costs therefore generating more free cash flow or a higher NOI just based on an energy efficiency review.
[00:09:01] Number 10 is review of your service contracts. Few properties are out sourcing the watering of plants anymore but there are still other areas to look for savings. With, preventive maintenance or with landscaping- there’s different areas with your turnover expense. If you’re outsourcing that make sure to get periodic bids to assure that the crews that you’re using are cost effective in addition to efficient in the use of your dollars and the product that they producing for you to address turnover. That’s the 10th item. Make sure that the contracts that you have in place are still valid from one year to the next and are still economically viable. It’s just another time to not get lazy and just assume that everything’s fine. Take the time to review what contracts are in place and if there should be any changes to those from one year to the next.
[00:10:08] Those are 10 ways the property managers and owners can find an additional $10,000 dollars on property. It’s not any one item that will make that occur but very likely a combination of these.
[00:10:22] For owners with smaller properties don’t be put off by the $10,000-dollar marker of savings or increased income because even with a smaller property being able to increase revenue by a thousand dollars a year or decrease expenses by a thousand dollars a year has a dramatic impact on the net operating income and the internal rate of return for that asset. Whereas we used $10,000 dollars as a placeholder number to get you thinking about what can occur you don’t necessarily have to shoot for that number on smaller assets.
[00:11:01] Think about your revenue stream. Think about having a positive impact on five to 10 percent of that amount. If your annual rental income is $50,000 dollars, then what can you do to improve that by five to ten percent by $2,500 to $5,000 dollars? Concurrently what can you do to reduce your expenses by that same amount of $2,500 to $5,000? If you put both of those together; $5,000 increase in income in a $5,000-dollar savings in expenses that is ten thousand dollars which represents 20 percent of the income stream for that asset. So, we’re back to that $10,000-dollar number yet again.
[00:11:52] I’m not trying to ask you to shoot for ten thousand dollars so much as I am asking you to apply the principles that we presented here and apply it to your asset no matter the size of the asset in terms of revenue stream and see what you can do to improve the numbers further securing the operational standing of that asset into the future.
[00:12:15] So take the list and pick and choose. There will be a spotlight page we download this information from the podcast. Take a look at that. I hope you find more than $10,000 dollars in savings or income on your property from implementing this list.
John Wilhoit is a real estate professional specializing in residential asset management and property management. John has an undergraduate Degree in Business and a Master’s Degree in Urban Studies. Learn more about John here.