How to get the Most out of your Rental Properties
Author: Gary Eldenburg
When it comes to owning rental properties, we all know what comes to mind: 'Is it a good investment? Will it yield a rental profit?'
So, the key question to ask is: What is the value of the property? What even IS value?
Does that matter? Yes. Because its all about Extracting Rents and minimizing costs. so Here are 5 ways to maximize your rate of investment.
Charge very high rental rates.
Let’s be honest, Luxury resorts in Aruba are not getting any cheaper, and Jimmy Buffet is finally playing in your timeshare’s location, not to mention the $90,000 RV we have on lease to get to and from Florida. There’s little time to left to wait for those rent payments that come in late from those snot nosed brats you rent to. So this upcoming lease renewal, hit them with a 10% increase. Will they complain? yes. Obviously, but they don’t know how hard YOU had it. You didn’t have smart phones and microwaves when YOU were a kid. Tell them, “sorry kid, life is unfair.” if they hit you back with a, “well, an entire 4 year degree was less than one semester for me.” say, “I had to work all summer to pay off that degree, getting paid only 1.25 an HOUR, you get ten times that at Walmart!” if they have any nonsense, like ‘buying power’ and ‘1965 immigration act’, just let it roll of your back.
If you are close to a college town, its worth it to weasel in there. College students are usually broke, but they get student loan money. Its not like they will commute from out of town. Buy the Biggest house you can afford and put in extra “rooms” where possible. College kids are smart (and dumb) and will attempt to fit as many kids in the building as possible, even if its not legal. What YOU do is pretend you didn’t know. $2000 a month for a trashy college house with 6 bedrooms seems like it would be way over priced for the normal person. But, for college kids, it’s a big score. They will live eight deep, all paying in cash to the lease holder and if their friends flake, its still on them so who cares? There will likely be parties and people putting holes in the wall. Again, its no problem. Take their security deposit and hire your druggie pal from highschool to do some drywall patching. IT DOESN’T HAVE TO LOOK GOOD because those kids won’t care. it does help to replace all carpet with laminate. It cleans up easier.
Buy Foreclosures in poor neighborhoods.
This is a perfect way to maximize your rent potential. foreclosures are usually well under market value because some schlub couldn’t pay their mortgage. When you pick it up for probably half price, you can slap a new coat of paint on every wall in the house and spring for the cheapest engineered plywood floor and put it right back on the market. 500 dollars tops and you could sell it or get tenants in there for twice the mortgage cost. Tip 5 will really maximize this location.
Convert 2 bedroom 2 bathroom homes into duplexes.
This works best in conjunction with foreclosures because of the lower cost and usually there is no issues doing renovations in bad neighborhoods because no one cares you're doing unlicensed work. (I’m not TELLING you to do this, I’m just saying what is.) A moderately sized home can easily be split into 2 smaller houses. what you do is turn the kitchen/dining room area into a kitchen/living room, and then the living room, throw in some cabinets and a sink. The oven will need a new 30amp plug but that’s not hard to do. After this, wall off these two sides and convert the back door into the new front door. Now, instead of clearing $1500 on a single family home, you can put up 2 listings on craigslist for $1500. The tenents won’t know any better and, what are they gonna do, just be homeless? its not like a bank will give them a mortgage because they don’t have enough to put even 3% down on a house. its probably because they spend all their money on a vape or whatever it is.
Keep a low standard of upkeep.
This one is one is one of the oldest tricks in the book, and some of us veteran landlords use it well. If you never fix anything, you can blame the brokenness on the tenant and just take their security deposit. (as if they thought for a second they might actually get it back, HA. Am I right, guys?) Obviously, if the Furnace broke, you’d have to fix that… and by ‘Fix’ I mean make it work. AC failed? No Biggie. You’ll get around to that.
Basement flooded? Drain it. No Big Deal. Tenant complains about a roof leak? You go up there with a can of rubber seal spray and spray it around the broken shingles. The rule of thumb is solve the complaint with as little money as possible. Use discretion though, because it can’t be TOO crappy. After all, if the place burns to the ground, Insurance might not cover all your expenses and that means no more rent money.
Section 8
This is a tricky one. On the one hand, you won’t risk losing a months rent, but on the other hand, you will likely cycle though many different tenants and dumpsters for their furniture when they bail. Essentially, you are getting the government to pay you money for putting up with the type of people who use Section 8 Housing.
You are well on your way to having the time of your life on your next awesome vacation, perhaps one that I recommend in my recent article. You earned it. You did it, on that cold planet up there.
Please comply with all applicable laws regarding rental ownership, taxes and building maintenance.