We’ve been discussing how to grow your rental income stream by coordinating tenants and neighbors to create new savings. This isn’t a novel idea, but I want to take it to the extreme – that is, after all, how we do it here.
Groupon, Inc. has grown in popularity and is quickly approaching profitability (Ticker: GRPN). They don’t have warehouses full of inventory or sell anything directly. They simply act as matchmakers between their subscribers and businesses offering steep discounts.
Here’s how it works: Companies make deeply discounted offers if, and only if, enough Groupon customers prepay for the offers. Once the threshold is met, the deal is on and Groupon splits the proceeds with the business.
This is a terrific business model, but there is room for improvement. Groupons are typically for dog grooming, vacations, and other luxuries – rarely for necessities.
I believe landlords can improve on the business model by connecting tenants and neighbors to companies supplying non-luxury items (toilet paper, food, etc.).
I’m convinced there’s money to be made by helping our current customers (tenants) save money.
Once you’re willing to reconsider the traditional role of a landlord, you will find plenty of potential profit centers around every corner. Who says a landlord can’t serve as a deal maker for every product their tenants (and neighbors) may need?
Is that too radical or unrealistic? Should we go back to the days when you carried a cell phone to make calls, a Walkman to hear music, and a PDA to manage your calendar? Integrating these devices is an example of value innovation at its best. A leap in value could also be realized if landlords entered the matchmaker business. Our limits really are self-imposed.
Here are some specific ideas I’m working on:
1. Create One-Time Groupon-like Opportunities. It’s easy to imagine that a mobile carpet cleaner could have a very profitable day by servicing a group of tenants’ (and surrounding neighbors’) homes if enough of them prepaid. Other opportunities might include car oil changes, pizza discounts, or deals with local grocers. Landlords could earn “other income” by sharing a percentage of the prepaid receipts.
2. Create Membership Clubs to Split One Service. The wi-fi distribution business I’m currently working on didn’t pencil out until I considered serving the surrounding neighbors in addition to my tenants. Since reselling commercial grade broadband is prohibited, I will need to charge users/members for a “newsletter” and give the wi-fi as a bonus.
Clubs/partnerships/associations can distribute products and services without dealing with resale taxes and other administrative burdens. Landlord could earn “other income” by delivering information and broadcasting services for a fraction of market rates.
3. Create Buying Clubs to Share Bulk Goods. This involves helping tenants and neighbors pool their purchasing power to buy commonly used bulk goods. Landlord could earn “other income” and by gathering credit card rewards, sales commissions, or in-store credits to use on unrelated purchases.
Putting My Money Where My Mouth Is
We are going to add these ideas to our $100 Idea Matrix and actually try to implement all three in the coming months. Of course we will report back so stay tuned (or subscribe so you don’t miss a thing).
Please leave a comment below. Let me know if I’ve lost my mind. It’s always great to hear from you.
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