To have a profitable and income stable business, you need multiple revenue streams. However, most, if not all, property owners only have one revenue stream, which is the rent. This is a good place to start, but the rent may not cover all of your additional costs.
You could raise the rent, but this could price you out of the market. A smarter option is to tailor your fees to the specific services that you provide each tenant. This will give you additional income and provide for the additional services.
In this article, I will highlight five revenue streams that will add more profits to your real estate investment business.
1. Pet Fee
A pet fee should be standard with any property management lease agreement. About 85 million families or 76% of US households own a pet, so this should add to your bottom line nicely. There are two methods for charging a pet fee.
You could charge a pet deposit. This is an additional deposit that’s paid by the tenant. If there are any pet damages when they move, this money is used to address them.
Another option is to charge monthly pet rent. Typically, this is $35 or less depending on the location and type of property. This monthly fee gets added to the tenant’s monthly rent.
You could charge one or the other of these fees or even both. The additional monthly income will increase your profits, while the deposit will reduce your overhead and also increase your bottom line.
2. Credit Reporting Program
In order to implement this, you need to build strategic relationships with companies that enable you to perform this service. However, once this is implemented into your service offerings, you only have to report the tenant’s good paying history.
Since rental payments aren’t typically reported to the credit bureaus, this additional service is one that can make your rental properties stand out. By reporting your tenant’s on time payments, they can improve their credit score.
You benefit from the additional revenue stream and the additional encouragement for the tenants to make their rent payments on time.
3. Tenant Change Out Fee
There are certain situations where you may agree for the tenant to have someone take over their lease. Perhaps the tenant wants to move out early but doesn’t want to get charged to break the lease. Or you have a tenant that you want to move out, but you don’t want to go through the eviction and collections process.
You could charge a tenant change out fee and agree to release the current tenant from the lease while allowing a new tenant to step into their place. This fee covers the cost of preparing and processing the documents for the tenant change out.
4. Documentation Fee
While it’s exciting to have a new tenant move in, there’s a lot of paperwork and documentation required. These documents take time to prepare and execute. By charging a documentation fee, your time and expenses are compensated.
5. Lease Renewal Fee
Every year property owners leave money on the table by renewing leases without charging a lease renewal fee. This fee will cover the expense of having an attorney make adjustments to the lease, performing a comparative market analysis, and obtaining the tenant’s signature. You could charge a percentage of the rent or a flat renewal fee.
Increase Your Rental Property Revenue Streams
By implementing these additional services, you can create additional revenue streams to help keep your rental business profitable. If you don’t want the hassle of having to figure out pricing and fee amounts, you can call a professional property manager. I am always here to help!
Roland JeanCharles, LCAM, RMP Candidate, CISSP
PMI JCM Realty Group