How to Increase Income with Apartments - Apartment Real Estate Investing

With Percy Nikora, Co-Founder

Generally, when we buy the property, one of the things we do, as part of our due diligence, is look at what the current rents are in comparison to what the market rents are, and what the current occupancy is, compared to market occupancy. We typically buy assets that are significantly below the current market rent, anyway, for a variety of reasons, so our plan would be to increase market rents.

As an example, an asset we just bought a few months ago - day one, we were able to increase the rent by $60. That may not seem like a lot, but $60 multiplied by hundreds of units adds a nice little boost to your gross income, and that's without making any real updates to the property yet. We're in the process, then, of improving the properties, so we'll continue to increase the rents as that happens. So, that's one way in which you would increase the gross revenue.

Obviously, if occupancy is low, we want to try to fill that. There are several marketing tactics, leasing tactics that we use to fill the occupancy. We also look at additional revenue streams. What I mean by that is, sometimes, utilities are- the previous owner may have bundled utilities with the property. So, we try to separate that out. At least most of the utilities - electricity, for example - we try to get individual meters so that it's billed on the tenant's name; so they're paying for that versus us. If it's something like gas, or water, we do something called RUBS, which stands for Ratio Utility Billing System, where we can bill back some of that- or at least based on their usage, a percentage of that price is billed back to the tenants. That helps increase our income, as well.

Then, we look for other sources of income. For example, there was a- one of our properties in Texas had a carport on, I'd say, about 75 percent of the parking spaces, but they were not being charged for that. So, we started to offer reserved parking spaces under those carports, and so forth. So, we get anywhere from $30 to $35 a month based- per car spot, per month. So, that's a nice revenue stream.

Similarly, there are things you can do on storage. If you have some storage facilities on site that are not being used, you can offer that as storage to the tenants. That's based on the market. You can get anywhere from $25 to $50 a month for the storage units.

You can provide insurance. We provide renters insurance, which is a requirement for most of our tenants. We tell them, "Hey, you can go to your- whoever is providing your insurance, or, for $12 a month, we can provide that for you. Here are the benefits of our policy compared to somebody else's policy." Because we buy it at volume, we actually- there's a certain profit that we get from that.

Laundry rooms is another; cable is another. There's a number of revenue splits that we set up with different vendors, and we provide that as an option to the tenants. So, if they sign up for cable, there's a percentage of that, that we get. Same thing, even with electrical companies ... There are similar programs, et cetera. Those are all the ways in which we look for additional revenue streams to add to the top line.

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