Epic Real Estate Investing - 5 Ways to Increase CashFlow in Your Investment Property | 736

Episode Date: August 6, 2019

This Tuesday, Mercedes shares her tricks on how to increase cash flow in her rentals. Tune in and learn all the “small” things that you can do with your investment property to increase your passive income! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing Show for Turnkey Tuesdays with your host Mercedes Torres. Hello and welcome, welcome to Turnkey Tuesdays, brought to you by Epic Real Estate Investing. My name is Mercedes Torres, your turnkey girl, and I'm lucky enough to be partners in crime with Mr. Matt Terrio, the guy who created the epic real estate empire.

Just to go over a few ground rules of this show, if this happens to be your first time here, welcome. This is a real estate investing show for busy people, busy people just like you, because I created this show for the person who understands. the importance of real estate, but just don't have the time to do it themselves, or they're too scared to take the first step to dive into real estate investing, or they're possibly just tapped out in their real estate investment journey, and they need help growing it. That is the reason for this show, and if you're a repeat listener, welcome back, my friends. Good to see you

again. So on today's show, we are going to discuss how to increase your cash flow of your investment property. Now, I'm all about maximizing your ROI. I'm a huge fan of increasing cash flow within reason. So I decided to share a few tips because I'm on the cusp of starting to increase generally right around this time because a lot of my leases come due. right around this time. So I decided to share a few of my tricks with you so that you too can increase your cash flow. Now, before I dive into today's hot topic, I want to give out some kudos and congratulations to a few cash flow clients that closed on some investment properties this last week. So first and foremost, Jim and Rachel from North Carolina, they closed on their first rent

in Little Rock, Arkansas. Congratulations. I know the second one is underway. Should be closing soon. And Lee F. and his wife, Holly, you close your first rental property and awaiting to close your second. That's actually closing in about a week,

so congratulations to you, my friends. Then we have two clients that jumped in the queue back to back, and, I mean, they put it all on the line. They both purchased two properties each. That's Tom F and Mitch N. Both picked up two rental properties that complement one another really, really well. So to all of you, my friends, congratulations.

You joined the 1% Club as less than 1% of America actually does what you guys just did. You invested in your financial future. So congratulations to each. every one of you. Now, back to my topic. How do you increase cash flow on your rental? Now, it's important I mention a landlord that provides value in form of a safe and secure, comfortable rental property that is well maintained. You shouldn't have a problem renting your property at all or even increasing the rent within reason. Now, I say increasing the rent, rent within reason because you just can't arbitrarily increase the rent any given month.

There has to be at the end of a term of a lease and you have to increase it accordingly. So what the city allows, it's usually anywhere from 1 to 3%. And it's really what the market dictates. So tenants most likely, or I should say reasonable tenants understand the value that you bring to the table. Now, on a side note, and this is a total side note, this is one of the reasons I stay away from lower price point properties. I have proven time and time again, my friends, that the amount of rent dictates the caliber of your tenant, the lower the rent amount, the lower the caliber of your tenant. And this is why my price points generally are within a certain range. I particularly like

cash flow or properties, a price point between $80,000 to about $150,000 in my approved markets in the Midwest and in the South. Now, I have proven for the last 12 years that my magic number works really well because my $800 property or my $80,000 properties generally rent for about $800. And the caliber of tenant that could afford to pay $800 per month in rent is a bit more, quote, unquote, reasonable. So having said that, I'm going to share with you some of my favorite ways to increase the cash flow in my rentals. Drum roll please. So, number one, and this is by far my all-time favorite. I've been doing it for about 10 years, and I still do it to this day, and it still works. And it's called pet rent. Yes, pet rent. I know, I know. Pets can cause damage to your property. They can pee on your carpet, they can

scratch the walls, it can cost you. But if you're very selective about who your tenants are and you include in your lease agreement that they are responsible for keeping the premises inside and out of your rental in good condition, then this is a great way to increase or to add pet rent that ultimately increases your cash flow. Now, here's the secret. I don't charge a pet deposit. I don't. Because a pet deposit, you have to give back. And it's usually in our price points, about $100, $150, maybe $200 at most, that you have to end up giving back. Now, in most cases, $200, eh, not a lot of money. in the grand scheme of things, if a pet does damage to a carpet, so to speak. However, I do charge $25 per month per pet. So in four months, I make $100, in eight months I make $200, that I don't have to give

back. And the rest is gravy because I get to keep it. It's part of the lease agreement. It's part of the lease agreement. of the rent and for the most part I have never ever lost a tenant because I charge $25 for the first one, an additional $25 for the second pet. So I've just increased my rent by $50 because my potential new tenant has two dogs or two cats. So that's my favorite. It works every, time and I always say you can keep the pet deposit. I don't ask you for a deposit for each one of your children and your pets are like your children. So you can keep the deposit, but you do have to pay $25 a month per pet. And I've seldom gotten kickback. So that's pointer number one. Point number two, add income from other sources to your investment.

This is extremely effective for duplexes, triplexes, and four units. Now, let me explain. Like, one additional source of income is storage. I like adding storage sheds or storage units and charging for it. Now, it could be your typical shed that you buy at, you know, Costco or your Home Depot, and it'll cost you a couple hundred bucks, but if you charge an additional $50 a month in four months, you've made that back, and the rest is for you to keep. Now, I usually do one-year leases, so it provides additional cash flow because the numbers make

sense. I also add parking stalls. Now, designated parking areas, you're You can just do that by drawing lines, and in many cases, you can do it yourself. Our property managers do charge a small fee for doing that, but each parking stall, you can charge an additional $25 to $50 a month. And even offering a parking canopy so that the car is protected from the sun or from snow, a basic canopy goes a long way. I do that all the times. I do it particularly for my duplexes, but, by the way, I don't have a whole lot of duplexes. They're not my favorite thing. But the ones that I do have, I will try to maximize as much as possible. Also, you know, who wants to shovel snow from their car? So in many cases, I will do maybe a little bit more durable car port for my single family residence, if that's an option. and I have the space for it. And that's in addition to their two-car garage, so to speak. Another thing that I like to do in my multifamilies is a coin-operated little laundry mat, like a washer and a dryer. Now, in one of my duplexes in Ohio, I turned the basement into a

mini laundromat with a washer, a dryer, a folding table, and an ironing board with an iron on it. I mean, it was a total win. I charged an extra $25 for the facilities, and they were coin-operated washers and dryers. Now, the property is in Ohio, and it's super cold, and again, this is a duplex. So all they had to do to wash is go downstairs

and put in their quarters. The wash is $1 for a wash and $1 for a dry. generally speaking, an average family does three washes and three dries a week. So with one family, I'm making $6 a week. I was making almost $20 a week from this with just adding a coin-operated mini laundromat in the basement of one of my units. Works all the time. And best part of it is I only have to go there once a month, where my property manager does, to collect the coin. and forward it to me. Now, for my single family residence, if my tenants don't have a washer and a dryer,

I've also purchased it for my tenants and allow them to pay for it and I charge them a financing fee and they get to keep the washer and dryer. Here's the best part of it. The washer and dryer is not my responsibility in this case. I buy a previously used one in really good condition and then I sell it to them. Let's just say that I buy it for $250 a washer. I will mark it up to maybe $350 and then I will have them make comfortable monthly payments for the term of their first year. Just one year. Because if they decide to move out, they want to take their washer and dryer, they can, I don't want the headache of the washer and dryer, and I've made money for it. So sometimes a little creativity, my friends, goes a long way. Number three, reduce other expenses. Your biggest cost relates to your financing.

So, my friends, spend some time to research your options and find the best financing options available to you. Now, I happen to work with the best of the best in the turnkey lending world, so I don't have that issue because all of our loans are 30 years amortizations. They're really good rates. They charge fair fees. But if you don't have that option, spend some time and do your research. Lower rates and longer amortization periods will increase the cash flow on your rental. Now, let's be real. Rates, you really have no control over them as they are regulated by the feds, but amortization, the length of your mortgage, or I should say the length of time that you're,

you're given to pay off the mortgage, you have total control over. Some people are of the school of thought that they want to pay their mortgage in 15 years, 10 years sometimes. I don't know why you would want to do that. That would just totally decrease your cash flow. And after all, the whole reason we're investing in passive income is to create passive income and shortening the time of your mortgage just eats your cash flow. So I like to lengthen the time because they have proven time and time again the numbers worth.

You can also have your tenant pay for all the utilities. Now, in most cases, in most of our rentals, the tenant has to pay for the electricity. But you can place on your lease agreement that the tenant is, also responsible for the water and the trash. Now, depending on your market, it may be a deal breaker, but in most cases, tenants, if they want your rental, they don't care paying for the water, and that just means more cash flow in your pocket. You may have to drop the rent a little to do so, but no need to worry about expensive heating cost or expensive water. usage because when your tenant pays for it, you will see how much of a game changer that is.

Awesome. Moving on. Number four, put down a larger down payment. Or I should say put up a larger down payment. That's number four. It's not always an easy solution for every investor, but putting more of a down payment on your investment property will increase your cash flow because it reduces your financing costs. Now, I don't always encourage this. In some cases, it goes back to the numbers, and it really has to make financial sense to you. I always say, do the math.

And it really goes back to, why are you investing in real estate? Do you truly need the passive income today? or are you investing in this property because of the tax deduction? Or are you adding this into your IRA portfolio where, you know, it doesn't really matter to you. So if in the event you can put a larger down payment, that is going to increase your cash flow. But before doing that, do the math, my friends. It absolutely makes a difference.

And number five, rebates and grants. It is absolutely the reason why I've been able to not only be more successful at finding qualified tenants, but it makes a huge different for me morally. Believe it or not, between rebates and grants available through many federal states and municipalities, like agencies that are local agency, there are a ton of potential programs out there that help you reduce the costs of upgrades or they subsidize certain things for you for your rental. So it's absolutely worth looking into. Now, all of the properties won't qualify. And let me just give you some examples. If you decided that you wanted to provide housing for veterans or for handicapped families, there are programs out there that will allow you not only stipends to do so,

but they will allow you the opportunity, for example, to make bathrooms handicap accessible. And there are programs out there that will have waiting list of tenants that are looking for a home. I have a blind tenant in one of my properties in Indiana. She has been my tenant for nine years. Her name is Molly. I seldom hear from Molly. She pays her rent on time every single month. And when she first came to our property, ironically, the one reason that she decided to go with our property is because it smelled really good.

She said it didn't smell like fresh paint. It smelled good. She asked me for a couple of few safety items. and I was aligned with the program, or I am aligned with the program in Indiana, that helps the blind. And so she has been in my property for nine years and has never, I mean, maybe called us four times with small minor issues. And I just absolutely love her. And every year for Christmas, she sends me a Christmas card. I think it's pretty special.

So, my friends, never underestimate the power of rebates and grants and subsidized programs through the city or even federal and state programs that will make a difference for other people. My friends, it will make a financial difference for you. All right, my friends. So, you know, we say often on this show, real estate, it's a people business. If you treat people like people, you provide quality rentals and you offer benefits to them, like basic benefits, storage, and specified parking with a shelter or sometimes even a coin-operated laundromat in a basement or a home that welcomes a pet. Trust me, people are willing to pay for it.

That's it for today, my friends. next week of Turnkey Tuesday, where Cashflow is king. Have an epic week. Is Wall Street failing to meet your expectations? Has your 401k tragically turned into a 201k or worse? Don't panic. You don't have a money problem. You have an idea problem. We're cashflow savvy.com and we'd like to share with you a new idea how one small shift can transform your financial future and accelerate its arrival. Go to cashflow savvy.com to get this new idea that Wall Street doesn't want you to know about. CashflowSavvy.com.

More control, less risk. Cashflowsavvy.com. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.