Do you remember my $200 Challenge? My goal was to figure out how to earn an additional $200 per month without raising rents. Well, I won, but not the way I expected.
Claiming Victory Because…
1 – I realized that my neighborhood has improved to the point where I can raise rents, so I’ve upped my rents by $25/unit. At $25 a unit, my eight-plex rental income will increase by $200. These increases are not realized yet; I just passed out the notices. Increases kick in on August 1st.
Yes, you’re correct, I said rent increases don’t count. It’s just that the Challenge forced me to clear my head and turn over every rock. Leaving $200 of unrealized rent on the table because rent increases aren’t innovative is just not smart.
I’ve worked hard for a number of years to create a great community surrounding my building. It’s fair game to capture a portion of the value I’ve helped create. My mission has always been to remove the stigma that holds property values down.
2 – I’ve closed a deal with the nearby medical school to use one of my units as corporate housing. This is one of the ideas listed in our Income Idea Matrix – check it out. I have to provide a few furnishings and cover utilities, but I know I’ll easily clear an additional $200 per month.
My offering is much less expensive than the hotels they were booking, so it’s a win-win deal. I’ve been working towards this relationship with the medical school for about three years. Glad we finally clicked during my $200 Challenge.
Now that this door is open, I hope to land more corporate housing arrangements with the med school, the largest employer in the vicinity. But I’m not going to stop there. It’s time to explore all the corporate housing options available included Airbnb.com.
If you create safety, you also create equity
3 Lessons Learned
1 – Set income goals for your rental(s). Jeffery Taylor, Mr. Landlord, has said this for years.
Much has been written about goal setting and there’s no need for me to rehash it. Chasing a goal puts you in a creative zone where you can influence your future. However, you’ve got to exercise your faith to operate in this zone. Sometimes you’ll be successful and other times you’ll fail, but you’ll never regret the pursuit.
2 – If you find an applicable money-making idea, take it. Corporate housing and rent adjustments are not clever ideations. I almost passed on both ideas because they weren’t sexy enough. However since my bottom line doesn’t care about earth shaking innovations, maybe my ego shouldn’t either.
The adjustments I’ve made are supported by lease agreements, and therefore justify an increase in my property’s value. Forced appreciation right before your eyes.
Although I’m not impressed with myself, I do recognize the additional $400 per month ($200 for corporate housing and $200 via rent increases) qualifies for $48,000 of new value assuming a 10% capitalization rate. Not bad considering how scared I was to publically place myself in a “put up or shut up” position.
3 – Exploit your area’s endowments. The medical school is less than one mile away from my apartment building, but because of the neighborhoods’ former condition, they would have never considered renting from me.
I was able to tap the area’s rental potential because my target neighborhood has revitalized to the point where we’re contenders. We are in the catalyzed stage and everyone in Sacramento knows it.
Check out my book to learn how you, as a landlord, can revitalize the area surrounding your rental and attract more profitable and honorable tenants to your rental. Click HERE to get the book.