Day Two – Increasing Your Rental Income
You’ve made it to day two, thank you and congratulations.
Now the big question, have you, or are you considering increasing your rents after reading day one?
Not all of the tips and suggestions I’m providing over the next several days may apply to you. You may have already been raising rents every year, you may already be doing several of the upcoming steps already, but I’m hoping a few of them are eye openers to you.
The important take away from all of this is you really need to treat your landlording as a business. This has been a continuing theme I’m always trying to impress upon people visiting my site.
If you treat this as a business you will be happily rewarded over time. And with any business increasing revenues (or at the very least maintaining the same level of profitability) is key to long term success and growth.
So after that preamble, lets talk about the second method for increasing your rents.
Increasing Your Cash Flow With …
Garage and Parking
My ideal residential rental property is an up down suited property with a detached garage. With this type of property I have two suites, the upper and lower units, plus I rent the garage out separately for a total of three revenue streams.
The price for an upper unit with or without a garage is quite often the same as many landlords don;t break it out, but by separating the garage out as a separate unit I can generate anywhere from an additional $100 per month for a single dirt floor garage up to $350 per month for a two car heated garage. Your mileage can vary depending on where you’re located!
For my property with the large garage, that’s an additional $4,200 of income a year or almost three full mortgage payments. For the property with the small garage, it ends up being just over one mortgage payment a year. All with minimal extra work.
Soooo, do you currently have garages that you simply give away to your tenants? Which means you could be leaving multiple thousands of dollars on the table each year?
It doesn’t end there though, depending on your property you may have additional or different space to rent out. If your rental property is near a downtown core where parking is limited and and expensive and street parking is restricted that extra parking pad at the back of your property may be very valuable.
I know of landlords within walking distance of our downtown core that get $300 and more for an off street parking spot which is a steal as parking in the core can easily cost $20 or more per day and covered heated parking is often $600 or more per month. That works out to $3,600 per year of additional income.
Recreational vehicle parking is also a huge opportunity. I remember viewing one property years ago that was on a large lot, had a two car garage and had an extended parking pad that ran down the side of the house.
The landlord there rented out the two suites, the detached garage and also rented out the back half of the parking pad to someone with a motor home for a total of four income streams on one property.
Now this wouldn’t work for every property, but what about yours?
Who Rents Garages and Parking?
When I broach the subject of garage rentals one of the questions I often get is who would rent a garage, or even a parking space? Well it’s often surprising or perhaps not when you look around.
If you’re targeting working class neighborhoods for your rental, which in my opinion are the best areas for rentals, you have droves of potential clients around you.
Whether it’s the mechanic who does side jobs and needs a place to work on or store vehicles, the woodworker who has far too many tools for his garage and needs a shop to the fellow who still has his Pontiac Firebird from high school and needs a place to store it so his wife can park in the garage during the winter, the list goes on and on.
I’ve rented garages out to tenants who use them to store vehicles to a handyman who stored all of his stock to a contractor who stored his equipment, additional vehicles and trailers in a garage. All to people who usually live within a few blocks of the property and like the convenience.
For the RV parking many cities have bylaws in place prohibiting street parking for trailers or motorhomes or restrict how long they can be stationary. With RV storage lots being further and further from cities due to the cost of land and the monthly prices going up as well, having something within your district suddenly becomes very attractive.
The more you think about it the more options and reasons there are someone may want to rent your local space. Even if it’s just for storage, whose costs also keep going up!
Long Term ROI With Improvements
Now you may be thinking this doesn’t apply to you as you don’t have a detached garage, or you don’t have a parking pad, but what if you added one? Or both?
There are many factors you have to work through to even see if this is possible, but if it is the most important one is would it be worth it? Maybe this is time for a little bit of math exercise by doing some dollars and sense?
Does it make sense for you to put money out to improve the property? To start you need to figure out how much rents would be for a garage or parking space. you can do some research on Craigslist or local papers to see if you can get a going rate for these types of spaces and then determine the yearly income it would generate.
If you see a typical single car garage rents for $125 a month that would be $1,500 worth of income per year.
From there how much would it cost to build a single car garage?
Prices vary every where, but let’s say you could get a simple garage in your region built for $5,000. Nothing fancy, but still worth $125 per month. In about three years and four months you would have that garage completely paid for and it would be generating a profit each month.
On top of that, the $5,000 investment could have added $5,000 or more to the value of the property. This makes it a win on multiple levels as you’ve increased the cash flow and the value of the property.
Now if this same garage cost $10,000 to build it would take almost seven years to recoup your investment, so it may not be quite as glamorous, but at the same time if it added $10,000 or more to the value of the property it may well make sense. The $125 per month may even cover any financing costs during that time making it an even swap initially.
It all comes down to the numbers. Maybe a garage doesn’t work but a parking pad does!
Wrapping Up Parking
Are you starting to think differently yet? Are you seeing some additional revenue ideas in your head yet? There are multiple ways out there to maximize your rent and we’ve barely started.
Tomorrow’s article will touch on a simple way to increase your revenue by decreasing your costs without any money coming out of your pocket. I hope to see you tomorrow.
Oh, and if you currently rent out a garage or parking space, or plan on it, tell us about it in the comments below.
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