Being able as an investor to increase your rental income is a skill as an investor that
will help you increase your return on investment and will allow you to grow your property portfolio
more quickly because you're getting more money in a bank, you can service more loans, you
can save deposits quicker and all that good stuff.
So what are some ways that you can increase your rental income on a budget on a shoestring
without spending a great deal of money?
Hi I'm Ryan McLean from OnProperty.com.au where I teach people like yourself how to
find positive cash flow properties all over Australia and how to take your property investing
to the next level.
When I was a tenant back in an old dodgy half a house in Miranda in Sydney which is on the
southeast inside of a Sydney.
We moved into that property and the rental income when we moved in was $3, 000 per week.
Now as young people who wanted to live in a high standard over property but didn't have
the money to do it we made some improvements to that property and when we left just 11
months later of that property was rented out like that in a snap for $3, 500 per week.
So you're looking at almost 20 % increase in rental income in just 11 months in a market
that wasn't growing, definitely not growing at 20%.
So what are some of the things that we did and how can you increase your rental income
as an investor.
Tip number one is the most simple one and the one that many investors fail to do and
that is to charge market right rents.
What a lot of investors do is they get a tenant in and the tenant pays their rent on time
(believe it or not) and they're good tenants so they don't increase their rent because
they obviously they're too scared that the tenant is going to go away and they're going
to have the problems finding a new tenant, plus the costs that go with that.
So what do they do?
They leave the tenant at the rent that they are at.
Six months go by, 12 months go by, they still don't want to lose that tenant and so they
leave the rent as it is or they might increase it $5 or $10 a week.
And before you know it you got a situation like my mom had in her building where she
was paying $305 (I think it was) for a property and the one below her exactly the same property
in terms of floor and space for just one floor below, and there is little old lady in there
who had been in there for ten years and she was paying about $170 in rent.
So that investor, because he was too afraid to lose a tenant didn't want to raise the
rents and was missing out on almost half of his rental income as time went on.
Now obviously as an investor you don't want to feel bad for raising rents on people and
you do need to take into account how much you're allowed to raise each time you don't
want to be excessive.
But the fact of the matter is that little old lady, yes she's been a great tenant but
the fact is if she had to go anywhere else in Cronulla, anywhere else in that area she
would have to pay a $305 per week or more.
So think about it as an investor, can you charge market rights, are you happy to do
that because that's the easiest way I found to increase your rents- is actually to charge
what the market is willing to pay rather than discounting because you scared it's not going
to rent out.
Tip number two is to add an air conditioner.
So this happened to my friends who were living in apartment and they wanted an air conditioner,
they were renting.
And they said “we are willing to pay $20 more per week if you pay and put in air conditioner
for us.”
Now, $20 per week works out to about $1, 000 per year.
I was at Bunning’s the other day and I saw an air conditioner, reverse cycle air condition
on sale for $6, 000.
Obviously he'd get better ones and you would got to pay installation but looking at those
figures, getting an extra $20 a week you could almost make your money back in a year or sometimes
even less by adding in an air conditioner to your property.
So that is definitely something that you want to consider.
Obviously we're going to be in Tasmania where they don't really want air conditioners, may
not as much value, but hey if it is reverse cycle and does heating as well then you could
be raking in the benefits.
Tip number three is to do a kitchen makeover.
So we're on a budget here, we're not going to spend $10, 000 on the kitchen but there
are some simple things that you can do to give your kitchen a makeover without spending
a lot of money.
The first thing that you can do is replacing the handles in your kitchen.
A lot of older kitchens have really old, usually really nobly handles, you can replace them
with brand new stainless steel ones, ones that are modern that look great and that will
automatically make your kitchen look ten times better.
You could paint your kitchen.
So your kitchen is an old outdated color maybe it's pink, maybe it's blue, maybe just an
old wood grain you could consider painting over that, maybe painting it a fresh white
to spruce up your kitchen.
Another thing that you could do is to replace the bench top.
Now you can get marble bench tops which are not actually the thick marble but it looks
like the thick marble because what they do is they take a really thin slice of marble
and then (I think it's MDF) and they basically do a layer of marble around the MDF.
So this is extremely affordable way to get a great-looking bench top without the hefty
price tag.
You can also look at replacing the taps in the sink to update the taps into make that
look more fresh and you can even look at updating the stove top or the sink as well.
So depending on your kitchen you may want to do all of these things or you may just
need to do one of them- maybe it's just the stove top, maybe it's the handles, maybe you
can paint the kitchen depending on what your kitchen is at.
Look at what's going to be in bring in the best return and make the biggest effect on
your kitchen.
When we renovated my parents house we increased the value by $75 to a $100 000 in the course
of a month.
All we did in that kitchen to improve it was changed the handles and it already had a white
bench top but had a wood grain around the bench top, so all we did was paint that wood
grain white, putting handles on, cleaned it up and it looked like a brand new kitchen.
Tip number four is to do a bathroom makeover.
Now in this property that I talked about at the start where it was $3, 000 a week and
then it went to $3, 500, the bathroom was disgusting.
We used to call it their Winnebago bathroom because the walls weren’t in tiles, they
weren’t even like deep rock or anything like, they were like a wall that you would
find in a caravan like some sort of plastic, I don't even know what to call it.
It had this blue like tiger print sort of green and it was just, it was hideous.
And then the bath was green and the tiles were green... and so we did paint job on that
bathroom and we painted the wall and we painted the green tiles on the bath and we painted
them white and then all of the sudden we had a new bathroom.
So many times I've been into apartments, been into houses that obviously are not brand new
and they've got these disgusting bathrooms, they are pink or they're green or they're
bright blue or their bright yellow, they are just weird colors; things that used to be
in fashion in the 90's, 60's or the 70's and people obviously don't want to spend $10,
000 or $20, 000 to go ahead and revamp their bathroom.
But little do they know that with the simple paint job you could actually revamp that bathroom
and make it look beautiful again.
So you can get tile paint to paint over tiles, you can paint the walls with a waterproof
paint and you can look at either getting new handles and new taps for the vanity or if
you have enough money go ahead and replace the vanity yourself.
You can get cheap vanities for around $500-$600 and you can put in a brand new so you do not
have the old one.
So there is a couple ideas, a ways that you can revamp a bathroom on the cheap.
Tip number five is to add a fresh coat of paint to the entire house.
This especially works when you've got a property that does not have a neutral colors.
You've got a bright pink room and then you've got a bright blue room and then the laundry
room is this dark black mocha color or something.
And what happens is when you've got all of these stock colors and non neutral colors,
you're actually going to turn away some potential tenant.
But if you have a light neutral color in your property maybe a white or cream or something
like that, because it's neutral, because it's light you're going to attract more people.
Now if you got two adults moving into a property and it's a two bedroom, you got your master
bedroom and then you've got your smaller bedroom which had previously been used for kids bedroom
and is bright pink and you got two guys moving in trying to live together how do you think
guy number two who's going to be sleeping in the pink room is going to feel about that.
Obviously he is not going to be too happy to bring his girlfriend over to his bright
pink room.
So you need to think about your target market and try and paint your house so that appeals
to the most tenants.
Tip number six is to look at replacing the flooring.
So we're talking about new carpets on you floorboards or new floating floorboards.
I recently had a mate who.. him and his wife opened the shop and it just had this discussing
floors and all they did was they went to Bunning’s and they bought floating floorboards.
And so what these are, these are floorboards that just click together.
They installed them in a day themselves for less than I think it's just a few hundred
dollars and the fall looked amazing, it looked like real floorboards that have been there
for ages and they are just floating floorboards that you could install yourself that was extremely
cheap.
Carpet you can do the same thing if you got Randy carpet then look at replacing the carpet,
make sure they you go ahead, if you're pulling stuff out like getting rid of old carpet,
talk to a quantity supplier and look at getting a scrapping scheduled done.
Because whatever value is left in that carpet you may be able to claim as depreciation against
shoe rental income and so forth.
So look at replacing the floors, doing it in a cost-effective manner.
Tip number seven is to ad an internal washing machine or dryer.
This is especially the case in units but can also be the case in houses where you've got
an external laundry and so forth.
By adding an internal washing machine and dryer you could increase the value of that
property.
This can be easily done, usually in a kitchen or near the bathroom, you can add in because
the plumbing is already there and it's easier, because a plumbing is already there its easier
for a plumber to wire that stuff up and by putting them on top of each other you can
put him in a cover and close the door.
It doesn't take up much space, people don't even know they're there and a lot of tenants
love having an internal washing machine and dryer in their property, they love it so much
that they're willing to pay for it.
The first unit that I lived in did not have an internal washing machine or dryer and we're
up two flights of stairs and it was two flights down to where the washing machine and dryer
was and basically we lived there for six months and I have never lived in the unit with an
external washing machine and dryer again.
So it's something that you should consider to potentially increase the rent, maybe you
can get $5 maybe you can get extra $10 a week by doing it.
Tip number eight is to convert a garage.
Maybe you've got a three bedroom house and you can convert the garage into a plus room
or into an extra bedroom or a study.
Obviously, check with the local council laws whether you're allowed to convert the garage
into different rooms but that may be something you can do cost-effectively to add an extra
room to the house and then put you in a next price bracket in terms of getting rental income
for that property.
Because you might be able... you might only have a three bedroom house, you can change
that to a four bedroom house, think of the extra rental income that you can command.
But obviously speak to your council, make sure that you are not going to break any laws
by changing a garage into a room.
Tip number nine is to speak to you rental manager.
A lot of people are thinking "Okay, I want to increase my rental income, how do I do
it?"
The best person you can ask is your real estate rental manager.
Why they're the best person to ask?
Because it's how they spend their 9-5, 5 days a week doing- working in your market, working
in the real estate market that you're in, helping people.
They're going to open houses every single day they're showing tenants around new houses,
they know the area, they know their clientele, they know what tenants in the area want.
And so you go to them and you say "Look Mr. rental manager, I've got a $1, 000, I've got
$2, 000 how can I increase the rental income on my property, what do you think are the
other spots where I can do it?"
I'm sure that because they are your rental manager, they're going to sit down and help
you do that.
So speak to your rental manager.
Tip number 10 is to ask you tenants.
So if you got good tenant, you've got long term tenants, or maybe tenants that had just
moved in why not asked them and say "is there anything that this house is lacking that you
would want?" and then obviously you can say look "well I'm happy to do it, that's going
to cost me a certain amount of money so I'm going to have to increase the rent, are you
okay with that" and then they can say yes or no.
So by talking to you tenants, finding out what they want like finding out that my friend
wanted air conditioner and they are willing to pay more rent for it.
By finding that out you can increase your rental income and get a better return on investment
and the best thing your tenants are telling you and so they're willing to pay for it,
you know that they are going to pay more for it, you don't have to wait and see if the
market will do it, you know because you've spoken to them about it and so that's a great
way to go.
So there you have 10 ways that you can increase your rental income for your investment property
on a budget.
I hope that this has been extremely helpful to you, thank you so much for watching and
listening and hang around this long, I hope that this has been helpful again.
I think this is going to be one of those podcast and articles that hundreds or thousands of
people view over the course in the next couple years.
So I was really excited to share it with you.
Until tomorrow when the next episode comes out stay positive and if you can, why not
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