If you own an investment property, you should be concerned about how much money it's making and how you can maximize your return on investment. In this post, I will outline 10 ways you can increase cash flow on your investment property.
An investment property could be an apartment building, plaza, senior residence or any other tangible real asset that is generating rental income. Let's dive in:
Do you know what renters are paying where your property is located? It's far to common to find properties where the renters aren't paying enough based on the area which can be attributed to poor management of the buildings. Make sure you're up-to-date with when tenants are moving in and make sure that rent increases are delivered on time. In Ontario, any rent increases need to be delivered in writing using this form at least 60 days before the lease termination date.
Utility expenses are one of the largest expenses you will have when you're dealing with an apartment building. If you have individual hydro meters, plan on converting tenants over the paying their own hydro as new tenants are moving into the building. Further, if you can, spending money on adding gas meters and having individual gas furnaces installed in the units to help reduce your over all burden and cash flow requirement. If you have radiant heat, look into investing individual sub-meters that can track usage of individual units and bill them accordingly.
This will help reduce your headaches with tenants wasting energy as well reduce your cash flow requirements every month with hydro bills. Having extra hydro and gas meters means additional delivery charges and these should be passed onto tenants as they bring you NO additional value.
Do the renovations
When ever a tenant leaves your unit, make a point to renovate the unit to ensure you're getting the best tenant and highest rents. If you're kitchen is dated, washroom needs updating, flooring needs replacement, do it! Most of the time, your payback on your renovation will be less than 2 years depending on the renovations that need to be done. This will ensure you get a nice bump in the value of your property compared to what you spend in renovating.
Coin Operated laundry
If you currently have a washer and dryer unit in your rental where you're paying for the hydro and maintenance, you should switch it over to a coin operated laundry and dryer. Not only will the machines pay for themselves, they will also help with your utility consumption and will make sure your tenants aren't abusing them by washing one shirt at a time.
This is one of the most common overlooked income for your building. Never include parkings when advertising your rentals rather have them as an extra to the lease. Further, hire a company to tag any unauthorized parking violators to make sure your generating as much revenue as possible from your assets.
Laundry and Utility rooms usually have lots of unused space available that's perfect for setting up lockers for the tenants. Again, make sure they aren't included rather are an additional service that is offered to the tenants if they require it.
Adding more units
Is there lots of storage or unused space in the basement of your building? Why not check with the city if you can add another unit there? Lockers usually generate 40-60 dollars per month while a bachelor in Toronto will generate over $700 per month. It's a great way to boost your income and value of the property. Adding a $700 per month unit in the building would increase the value of the property by about $125,000. I was working with a listing where the buyer could add a new floor to top off the building adding 4 more units in the building and increasing equity by $1,150,000.
A building has to be run like a business. Keep track and follow all your expenses in detail. Audit them on regular basis. There is an unwritten rule with any business; anyone can bring money into the business but any expenses have to be approved by the owner or a high ranking manager. Follow this rule! Audit your expenses quarterly at the very least to see how you're comparing you the years past or your budget. Find ways to trim your expenses as they will add to the value of the property.
Object any tax increases! There are consultants available that will help you review the valuation of your property and find ways to help keep your taxes low. This all adds to your bottom line so pay attention!
General Maintenance and Cleanliness
Attracting good tenants is the lifeline of your business and good tenants aren't interested in moving into places that looks like slums. Spend money in maintaining your property and keeping it clean. It will foster a culture of taking care of the building and keeping it attractive. Tenants will stay here longer and will take pride in the space they live in. Offer incentives to tenants willing to spend energy in gardening or helping out with the maintenance of the building.
I hope these tips will help you better manage your buildings. If you would like to learn more about how to increase profitability of your building or what your property is currently worth, feel free to leave a comment below and let's talk!