By Nelson Camp
Landlords, don’t be so quick to throw in those amenities for free. There are five key ways to generate additional income beyond standard monthly rents, while at the same time developing better, more responsible tenants.
I like the flexibility that laundry offers because in some buildings, you can offer it in a coin-operated form. Or, if you prefer not to lease or buy machines, you can offer it as an a-la-carte service.
If tenants choose laundry, it can bring in an extra $25 per month on their lease agreement. If they don’t want laundry, they can go to a laundromat, but I find that in 100 per cent of cases, the tenants will pay the extra cost for laundry.
2. Splitting utilities
I split the utilities in my buildings so that I don’t incur utility expenses. For example, in the last project we did, we had the building split up into multiple units, but the furnace is heating only one of the living spaces. So that tenant will be picking up the cost of gas for the furnace.
The other tenants are heating their apartments with baseboard heaters, so they have their own hydro meters, and they pick up their own costs. This really increases the cash flow and brings down the expenses if all tenants are responsible for their own costs.
When we refinance, we like to push our financing back as far as we can, and that can save you a lot of money on your mortgage payments. For example, if you have your mortgage down to 20 years, and your business plan focuses on cash flow, you may want to remortgage that building back up to 30 years and bring your mortgage payments down by $300 to $500 a month. You would then have that amount as extra cash flow per month.
4. Tenant responsibilities
It’s very important to give the tenants responsibilities and discount on their rent. So the actual rent value can be an artificially-inflated number with the understanding that they will be responsible for taking out the garbage or recycling, cutting the lawn, shoveling the snow, or whatever it is that you work into the lease agreement.
In Manitoba, we are allowed to offer a discount on rent. For example, I might be renting a two-bedroom unit where the regular price is $1,250, and I rent it out at a discount of $1,050. If ever the tenant doesn’t do their duties, they are responsible for paying the full value of $1,250.
5. Renting additional items
There are a number of other elements of a property that can be rented out. In one of my properties, I rent the garden out for $250 per year because people are looking for green spaces to plant a garden. The tenants take care of it so that I don’t have to worry about it going to seed.
I also offer parking as an additional cost that is not usually included in the rent. I rent an area for parking that is in high demand, so if a tenant doesn’t want the parking, I can rent it out to someone else in the community.
This article was first published in the January 2014 issue of CREW
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate