In today’s business environment, we hear a lot about doing more with less: a saying that should stop real estate investors (both new and experienced) and make them think. Instead of acquiring as many rental properties as possible, it’s important to take a step back and ask whether you are getting the most out of your current portfolio. If you aren’t getting the maximum return on each one of your investments, you are giving up viable rental income on property. So, before you add more properties to your real estate investment portfolio, expand on what you already have.
5 Ways to Create Additional Rental Income on Property
1. Offer Property- and/or Convenience-Related Services
With the rise of the sharing economy, people, and Millennials especially, are prioritizing access over ownership, making property and/or convenience-related service offerings an easy way for you to generate additional rental income on a property. From an investment perspective, property-related services will add resale value by raising the return on asset value (capitalization rate).
Multi-Family Property Ideas:
- Coin- or card-operated laundry
- Vending machines
- Exercise facilities
Single-Family Home Ideas:
- Landscaping services
- Snow removal
- Exterior cleaning (window washing, leaf removal, etc.)
By 2020, Millennials will account for one-third of the American population, and offering convenience-related services is something this group is used to paying for as part of the sharing economy. For example, offering dry cleaning, babysitting, dog-walking, concierge, or even a shuttle to/from a commuter train station can be an easy way for you to generate additional rental income on a property.
2. Garage Space, Parking, and Storage
Don’t automatically include a garage, parking, and/or storage as a giveaway for your tenants, since these are all assets that can generate additional rental income on a property.
Depending on the location of your property, parking spaces and storage spaces go for premium prices, and not leveraging these assets to their full potential means you are leaving money on the table. For example, if your property is in walking distance of a downtown core where commuting by car is the norm, offering the spot to a person willing to pay a premium for the convenience of not finding street parking every day (or risking a parking ticket) can be a great way to generate hundreds of dollars a month in additional income on just one property rental.
Parking for recreational vehicles and classic cars, bike storage, and spaces for heavy equipment and tools (woodworking, lawn, home, etc.) are all opportunities to generate rental income on a property.
3. Upgrades and Improvements
Making upgrades and improvements requires an upfront investment but will generate additional rental income on the property for years to come. However, before you start any projects, you need to do the math and make sure you come out ahead. For example, spending money to add a garage to a single-family home in an area where the climate is temperate and there is ample outdoor parking space likely isn’t something tenants will be interested in paying extra for.
One way to find out what types of property investments make sense is to head over to Craigslist or Trulia and see what types of things other landlords are offering. Not only will this competitive research yield answers to your upgrades/improvements question, but you will also see the going rate for different assets.
4. Generate Your Own Electricity—And Sell It!
Every year, solar panels get cheaper and more visually attractive, providing you with an opportunity to create a new revenue stream from your investment properties. Depending on your location and investment structures, you can get tax rebates, installation incentives, and equipment discounts when you add solar panels to your property. Once your solar panels are up and running, you can either charge your renters for it or sell the excess to an electric company.
5. Furnished (or Semi-Furnished) Rental Units
Renters expect to pay more for a furnished (or semi-furnished) property. While there is a risk of damage to the furniture, it can be offset by taking a larger security deposit. The secret about furnished rentals is that people don’t expect the furniture to be brand new, so you can furnish it with used pieces. Since furniture does not hold its value well, you can buy beautiful pieces for a fraction of the original cost.
For more ideas about how to generate rental income on a property, sign up to the Creating Wealth Show podcast (video versions are available on YouTube). Hosted by Jason Hartman, a real estate industry heavy-hitter who is dedicated to helping ordinary people achieve the American Dream of financial freedom, the Creating Wealth Show is an essential listen for anyone interested in building wealth outside of Wall Street.