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ContinueDiversifying income streams is one way to increase cash flow and maximize the profitability of your real estate business.
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Written by
Ben Luxon
PUBLISHED ON
2
Aug
2023
Landlords are constantly seeking ways to enhance their real estate investments and boost their income. While rental revenue is the primary source of profit, it is not the only option available.
By diversifying their income streams, landlords can maximize their financial gains and expand their real estate business. In this article, we examine various strategies for adding new revenue streams, assess their suitability for your business, offer guidance on getting started, and provide a brief financial analysis.
Suitability: This additional revenue stream is well-suited for most landlords, particularly those managing large units or university housing. Students, in particular, may not prioritize regular cleaning, making it a valuable service to offer as part of their lease.
Benefits: Providing cleaning services can help maintain your properties in better condition, leading to reduced long-term capital expenditure charges. You can also collaborate with the cleaning service to focus on areas that maximize these benefits, such as regularly cleaning refrigerator coils to extend the appliance's lifespan.
Challenges: Independent landlords overseeing smaller properties may face more difficulty in selling these services. However, it's worth discussing with tenants to gauge their interest. Even if only a few units opt for the service, it can still generate meaningful profit.
1. Find a reputable cleaning service provider: Ensure the provider you choose is trustworthy to maintain the security of your tenants' belongings.
2. Contract out the work: Customize the services based on tenants' needs, such as monthly, weekly, or bi-weekly cleanings.
3. Determine pricing: The frequency of cleanings will affect the cost, with weekly cleanings typically priced lower than monthly ones. Adjust your additional fee accordingly.
4. Collect payments: Include the cleaning services package in the lease agreement if the tenant's requirements are known upfront, or create a lease addendum once they've signed the lease agreement.
Cost: $50-100 per cleaning.
Charge: $10-30 on top of the cleaning cost.
Revenue Summary: Tenants will pay $60-130 per cleaning, resulting in a profit of $10-30 per unit per month.
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Suitability: Any landlord with unused space can benefit from renting it out, requiring minimal additional effort while potentially generating significant profits. Spaces like garages, sheds, unfinished basements, and uncovered parking spots can be utilized effectively.
Considerations: Renting out excess space does come with additional liability. It's essential to establish clear guidelines for space usage and stay on top of maintenance. There is a possibility of conflict between storage space renters and existing tenants, which can be minimized by setting clear guidelines.
1. Assess available space: Determine how much storage space you have and how it can be best utilized.
2. Understand the laws: Familiarize yourself with state regulations governing non-dwelling units, including zoning, building codes, and rental requirements. Compliance with these regulations is crucial.
3. Define terms of use: Prepare a contract outlining the terms, require a security deposit, and establish a plan of action in case the renter fails to fulfill their obligations.
4. Rent to non-tenants: It is advisable to avoid renting non-dwelling spaces to existing tenants, as it can lead to complications. Maintain a separate relationship with storage space renters.
5. Collect rent: You can collect rent monthly through cash or check, or preferably you can employ an online rent collection software like Landlord Studio to automate this task or you.
Cost: Initial setup costs can range from $0 to $200, depending on any required work.
Charge: Set rental rates between $35 and $200 per unit per month, with the following breakdown:
- Garage: $100-200
- Uncovered Parking Spot: $50-100
- Small Shed: $35-50
- Large Shed: $150-200
Revenue Summary: Renters will pay $35-200 per unit per month, directly increasing your profitability.
Suitability: Despite the growing popularity of streaming services, many tenants still desire access to traditional TV programming. Offering satellite TV can be a viable additional revenue stream for landlords, as it has a low entry barrier. Both landlords managing multiple units and those with a single unit can take advantage of this opportunity.
Choosing a Provider: There are several TV providers available, such as Spectrum, AT&T, Comcast, Dish, and Verizon. If you don't already have a preferred provider, we recommend shopping around, inquiring about package discounts, and comparing prices before making a decision.
Considerations: Offering satellite TV does require some time commitment. You need to select a provider, set up an account, install the necessary hardware, and provide assistance to tenants. It's important to address any potential issues related to tenants engaging in illegal online activities and implement a plan to prevent such behavior.
1. Create a game plan: Decide whether you will offer TV and Wi-Fi as a bundle, choose a provider, and determine the pricing structure for tenants.
2. Contact the provider: Once you have a plan in place, get in touch with the chosen provider to obtain a price estimate and set up an account.
3. Install the hardware: Many providers offer installation services, simplifying the process for landlords.
4. Advertise the amenity: Highlight the availability of TV and/or Wi-Fi services to prospective tenants in your rental listing, emphasizing the added value it brings. Set yourself apart from competitors by promoting these amenities.
5. Collect payments: You can include the TV service charges alongside the rent. Add an addendum to the lease agreement or incorporate it before signing.
Cost: The monthly cost per unit typically ranges from $50 to $100.
Charge: Set your monthly fees between $10 and $30 per unit, considering additional offerings such as extra channels or Wi-Fi access.
Revenue Summary: Tenants will pay $60 to $130 per month, resulting in a profit of $10 to $30 per unit per month.
Suitability: Landlords facing issues with tenants subletting their spaces as short term rentals through Airbnb without permission can turn this situation into a revenue opportunity. Trusted tenants willing to sublet their units or guest rooms can solve the problem, particularly in areas with high visitor and tourist traffic. This approach can fill a need in various locations across the country.
The "innkeeper model" describes the relationship between the landlord and tenant when subletting with Airbnb. As the landlord, you handle the financial aspects, using the Airbnb platform, dividing profits with the tenant, and managing other financial procedures. The tenant acts as the innkeeper, assisting renters, providing information, and taking care of housekeeping duties.
Considerations: The main considerations include the cost and time required to furnish the space, updating the lease agreement with the tenant, and the potential risk of dealing with unruly Airbnb renters.
1. Select a trusted tenant: Find a tenant who is willing and reliable to rent out their unused space.
2. Establish a formal agreement: Work out all the logistics and update the lease agreement accordingly to reflect the subletting arrangement.
3. Furnish the space: If you lack time, you can delegate the responsibility to the tenant, providing them with guidelines and a budget range.
4. List the space on Airbnb: Determine an appropriate rate, take professional photos of the space, and create an appealing listing to market the unit.
5. Collect rent: Renters will pay through the Airbnb platform, and you will then issue a check to the tenant according to the agreed-upon arrangement.
6. Cleaning responsibilities: As the innkeeper, your tenant will be responsible for cleaning the space between rentals.
Cost: Furnishing the space can range from $1,500 to $4,000 per room.
Charge: Set a nightly rate between $50 and $150, considering factors like location and amenities.
Revenue Summary: Even with only 15 rental days per month, your monthly revenue per unit can reach $750 to $2,250, significantly boosting your income.
Suitability: Corporate housing involves renting fully furnished apartments or homes to businesses for housing their traveling workers. It can be a lucrative option for landlords, regardless of their location, the size of their real estate business, or the luxury level of their units. Construction workers, high-level executives, and various professionals require corporate housing, creating demand across different industries.
Considerations: The main considerations include the cost and time required to fully furnish the property, potential maintenance/upkeep needs, and the level of foot traffic and usage the units will experience.
1. Assess the local market: Understand the demand for corporate housing in your area. Determine whether there is a greater need for luxurious units or more affordable options based on the types of visitors.
2. Furnish the space: Ensure the furniture and amenities align with the needs and expectations of potential renters and businesses.
3. Determine pricing: Corporate housing should offer a better deal than hotels. Aim to set prices around half the cost of nearby hotels. For example, if hotels charge $100 per person per night, target a rate of $50.
4. Market the unit: Advertise the corporate housing on your website, social media platforms, and through partnerships with travel agencies. Use high-quality photos and detailed descriptions to showcase the space.
5. Maintain cleanliness: Prioritize maintaining the units in peak condition for each new renter's arrival to ensure a positive experience.
Cost: Furnishing an apartment or house for corporate housing can range from $3,000 to $10,000 per unit.
Charge: Set a nightly rate between $50 and $150 per person, offering competitive pricing compared to local hotels.
Revenue Summary: With a minimum rental period of 20 days per month (typically required for corporate housing), your monthly revenue per unit can reach $1,000 to $3,000, contributing to increased profitability.
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Suitability: Monetizing spare land can be a viable option for landlords, particularly those in rural areas, but also in metropolitan areas with available land. It requires assessing the potential uses for the land and determining what makes sense for your specific property.
Possible uses for the land: Consider options such as livestock grazing, fruit tree orchards, shade tree cultivation, beekeeping, local gardens, or other suitable activities. When selecting the best use for your land, take into account the available space, relevant laws and regulations, the impact on existing tenants, and the profit potential.
1. Assess your land: Evaluate the characteristics of the land to determine what activities or purposes would work well within the available space. You may even explore options like growing produce or utilizing the land without renting it out to others.
2. Advertise the available land: If necessary, seek individuals or businesses that could benefit from renting your land. Long-term rentals are generally preferable for stability.
3. Determine a price: Set a rental price based on the size of the land and the intended use. Consider market rates and the value you can offer.
4. Create a formal agreement: Develop a comprehensive agreement that outlines the terms and conditions of the land rental, ensuring legal compliance and protecting your interests.
5. Maintain the land: Keep the land well-maintained and visually appealing between rentals to attract potential tenants and facilitate smooth transitions.
Cost: The initial cost will vary depending on the necessary work required to prepare the land for rental, ranging from $0 to $500.
Charge: Rental rates can range from $50 to $400 per month, with larger plots of land typically commanding higher prices.
Revenue Summary: By monetizing your spare land, you can generate a direct monthly income of $50 to $400 per rental. The more land you rent out, the greater your revenue potential, offsetting any upfront costs and increasing profitability.
Suitability: Leasing a billboard can be a lucrative option for most landlords, as it offers the potential to generate revenue by selling advertising space on various parts of their property. Whether it's fencing, siding, roofs near airports, tree lines, grassy front yards, or porch railings, these areas can be utilized to rent out ad space to local businesses, events, or non-profit organizations.
Considerations: While billboards require minimal time commitment, navigating zoning laws can be challenging. It is crucial to understand the regulations governing billboard placement, size limitations, duration of display, and permissible advertising types. Finding long-term leases may also pose difficulties, potentially leading to revenue losses.
1. Review local zoning laws: Familiarize yourself with the zoning laws specific to your area, as they can vary significantly.
2. Assess available space: Determine the most suitable locations on your property for advertisements and identify the permissible size limits.
3. Display an "Advertise Here" sign: Hang a sign with your contact information to attract potential renters. Consider reaching out to local non-profit organizations to kickstart leasing.
4. Establish a formal agreement: Ensure renters sign a contract that covers all logistics, including pricing, contract duration, and advertisement size.
5. Collect rent: Offer flexible payment options, such as cash, check, or digital payment services, to incentivize potential renters to advertise with you.
Cost: The costs associated with leasing a billboard can range from $50 to $5,000. This may involve expenses for marketing or the option to erect your own billboard structure.
Charge: Advertisements can be rented out for prices ranging from $100 to $4,000 per ad per month. Smaller advertisements may command lower rates compared to traditional billboards. The location of your property will also impact the potential rental rates.
Revenue Summary: While there may be an initial upfront cost, leasing billboard space can generate substantial revenue of $100 to $4,000 per ad per month. This income directly contributes to your bank account, making it a promising avenue for increasing profitability.
Suitability: Leasing a cellphone tower on your property can be a highly profitable opportunity, but it's important to note that not all landlords will have the necessary space or be located in areas where service providers are actively seeking to build new towers. However, if both these conditions apply to you, leasing a cellphone tower can lead to significant financial gains.
Considerations: It's essential to navigate through complex zoning laws and meet the strict requirements set by service providers for cellphone tower installation. While this process may involve some challenges, the long-term and lucrative nature of the contract can make it a worthwhile endeavor.
1. Conduct research: Determine if any service providers are actively seeking to install a tower in your area. If not, it may not be worth investing further time and effort.
2. Assess your land: Ensure you have enough space available, as cellphone towers typically require anywhere from 500 to 5,000 square feet of land.
3. Familiarize yourself with zoning laws: Study the specific zoning laws governing cellphone tower installations in your city, as they can vary significantly.
4. Determine your value: Before entering price negotiations, research the average lease rates in your area to ensure you secure a fair and competitive agreement.
5. Sign the contract: Leasing agreements for cellphone towers typically span 25 years, so carefully review and sign the contract once terms are agreed upon.
Cost: The upfront cost for building a cellphone tower can amount to approximately $175,000.
Charge: Monthly rental rates for leasing a cellphone tower can range from $1,300 to $2,500.
Revenue Summary: While the initial cost of building the tower is large, over the typical 25-year contract period, you have the potential to generate significant profit.
Note: It's important to consult with legal and industry professionals to ensure compliance with local regulations and to negotiate favorable leasing terms.
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Suitability: Installing coin-operated laundry machines can be a beneficial choice for landlords looking to attract more tenants and create an additional revenue stream. While multifamily buildings are particularly well-suited for this, any landlord can take advantage of this opportunity with minimal time commitment and initial investment.
1. Purchase coin-operated washer and dryer units: Research and compare prices to find the best deal. Consider buying multiple units at once, as this may qualify you for a discount.
2. Determine the placement: Choose a common area within your property, preferably a centralized location, to install the laundry units for easy access.
3. Include a change machine: Install a change machine in the same area as the laundry units. This convenience encourages tenants to utilize your equipment.
4. Collect revenue: Regularly collect the coins from the machines and maintain a record of the income generated.
Cost: The cost of each coin-operated laundry unit typically ranges from $700 to $1,000.
Charge: Set a reasonable price per washing and drying cycle, typically between $1 and $2.
Revenue Summary: Depending on the number of washers and dryers purchased, the upfront investment can range from $1,400 to $10,000. On average, landlords can generate monthly revenue of $75 to $200 through coin-operated laundry.
Note: It's important to maintain and repair the machines over time to ensure their smooth operation. Additionally, consider any applicable regulations or permits required in your area.
Suitability: Installing vending machines can be a lucrative option for landlords managing properties with four or more units, particularly those with families. Capitalizing on kids' love for snacks and beverages can result in a significant profit.
1. Assess demand: Determine if your tenants are interested in having vending machines and if they would utilize them. Consider the preferences of your current tenants and the potential to attract prospective tenants based on the types of machines and products you offer.
2. Purchase vending machines: There are different options available for acquiring vending machines. You can opt for a company that provides the machines at a low cost, fills them, and handles maintenance. Alternatively, you may choose to purchase the machines and stock them yourself. Consider the time investment and desired profitability when making your decision.
3. Install the vending machines: Identify a suitable common area within your property, ideally centrally located, to place the vending machines. Placing them indoors will help control access and minimize unwanted outside traffic.
4. Collect revenue: Regularly collect the money from the vending machines and keep track of the income generated.
Cost: The cost of purchasing vending machines typically ranges from $1,000 to $5,000, depending on the type and quality of machines chosen.
Charge: Set reasonable prices for the items within the vending machines, usually ranging from $1 to $3 per item.
Revenue Summary: The monthly income from vending machines can vary based on the number of machines installed, the number of tenants, and their purchasing habits. Landlords can potentially earn anywhere from $100 to $2,000 per month through vending machines.
Note: It's essential to monitor and restock the machines regularly to ensure they remain operational and offer a variety of appealing products. Additionally, consider any applicable regulations or permits required in your area for operating vending machines.
Suitability: Renting out U-Hauls and trailers from your real estate business can be a lucrative opportunity for generating additional revenue. Becoming a U-Haul dealer offers advantages such as no franchise fee, a commission percentage of around 21%, and the potential to attract potential tenants to your business. However, it's important to consider the time commitment required for managing the rentals, including customer check-ins, vehicle maintenance, and cleaning.
1. Visit the U-Haul website: Explore the U-Haul website to gather additional information about becoming a dealer. You can also submit your information online to initiate the process.
2. Apply to become a dealer: Submit your application to become a U-Haul dealer, either online or by contacting a representative for assistance.
3. Complete U-Haul's training: U-Haul requires new dealers to undergo their training course to ensure familiarity with their processes and procedures.
4. Receive the equipment: U-Haul typically delivers the trucks and trailers to your location once you have become an authorized dealer.
5. Get listed on the U-Haul website: As a U-Haul dealer, your business will be listed on their website, which can attract customers and drive rentals to your location.
Cost: The main cost associated with U-Haul rentals is the refueling expense, ranging from $25 to $250 per month, depending on the usage.
Charge: Determine competitive pricing for renting out U-Hauls and trailers. Consider charging a base fee per piece of equipment, ranging from $10 to $50, along with a mileage fee ranging from $0.50 to $0.75 per mile.
Revenue Summary: The potential monthly revenue from renting U-Hauls and trailers depends on the demand in your area and the number of available equipment units. Landlords can potentially earn anywhere from $100 to $500 per month through U-Haul rentals.
Note: It's important to fulfill the responsibilities of a U-Haul dealer, including customer service, vehicle maintenance, and keeping the equipment clean. Adhering to U-Haul's standards and guidelines will help ensure a positive rental experience for your customers.
While not all of these revenue streams may align perfectly with your properties or business, it is likely that there are one or more strategies mentioned above that can be easily implemented to start boosting your revenue today.
Each opportunity presents its own unique potential, so it's important to assess your specific situation and choose the options that best fit your needs and resources. By exploring these additional income avenues, you can diversify your revenue streams and maximize the financial potential of your real estate business.
And of course, no matter how you increase your rental property revenue it’s essential for you to employ a quality income and expense tracking solution like Landlord Studio so you can optimize cash flow, file an accurate tax return, and ultimately maximize your rental property profitability.
Landlord Studio is an easy property management and accounting software and app designed for landlords.
Track income and expenses, run reports, collect rent online, find and screen tenants, manage property maintenance, and more.
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