by Stefan Aarnio
Photo left: John Brauc and Stefan Aarnio
Today, I'm writing from my hotel room in Chicago, IL at Mini-Mega Partnering hosted by JT Foxx. This event is full of great content and I'm meeting some amazing investors and business people.
One of the local investors I met today is a veteran investor operating in Chicago by the name of John Brauc of Key Capital Partners (http://keycp.com). John has extensive background owning, acquiring and operating properties in the Chicago area for the last 23 years. I'm 26 years old today so John has been investing in real estate for almost as long as I've been alive. John was originally a Rich Dad student. Later, he became a JT Foxx student and now he is a trainer for JT Foxx and owns/manages around 30 properties and over 500 doors.
John is an expert in multi-family and shared with us 15 creative ways to increase the cash flow on any property. Some of these tactics and strategies will apply to some properties and not others, but it's always a good idea to have ways to increase the margin on your properties because as John Says: "Each multi family property is a business... NOT A PASSIVE INVESTMENT".
Here are 15 ways to increase the cash flow on any property:
#1) Increasing rents - This one is a no brainer, just make sure you don't get greedy and go too far over market without increasing value or your vacancies will get out of line.
#2) Make tenants responsible for their own utilities, electric, cooking gas, heat, and water - When tenants are responsible for their own utilities, they think twice about leaving the lights on and the heat high. Accountability brings responsibility.
#3) Purchase your own Coin-op laundry - John manages mostly C class units and coin op laundry is a beautiful ALL CASH money maker. Other ways to increase laundry revenue are soap dispensers. On B class units, I like to install in suite laundry for a premium on the rent.
#4) Storage lockers and charging fees - Storage is a huge business in the USA and Canada, people will pay irrational prices to store their junk. Storage is very cheap to set up and fairly easy to manage. This is a great way to utilize wasted basement space.
#5) Charging for parking spots - Parking is an excellent money maker. John likes to separate parking from the lease so that he can take away parking should a tenant go delinquent. I like to include parking with my leases and make an "all inclusive package". Figure out what's best for you.
#6) Installing proper heating controls - Tenants who can easily control their heat will manage their utilities better.
#7) Insulate and air seal roof cavities - John is a fan of insulating roofs because it helps make his buildings run more efficiently. If the tenants are spending less money on heat, then they have more dollars to pay rent. It's good customer service and it makes sense.
#8) Insulating steam pipes and domestic hot water supply lines - If you have a boiler, insulate the lines to increase efficiency. Boilers can be very expensive to operate and they are usually paid by the landlord.
#9) Window Replacements - Window replacements can often be financed through utility loans or financial incentive programs. This raises morale on the building, makes the tenants happy because it reduces drafts and makes the building have great curb appeal.
#10) Weather stripping around entry doors - This one is self explanatory and can often be over looked by most landlords.
#11) Balancing steam systems - Keep your mechanicals in top shape, adjust your sensors make sure everything is running properly.
#12) Installing fluorescent lighting - Low efficiency bulbs can save hundreds on electrical bills over time.
#13) Energy incentive programs - Seek out every grant, tax and incentive program to reduce energy. There are numerous programs in every area and take maximum advantage of these.
#14) Challenge tax assessments every year - Every property owner complains about rising taxes. John appeals his tax assessments every year and wins concessions. This is a brilliant move because he hires his lawyers to do the appeal and pays them a percentage of his tax savings.
#15) Scheduling/budgeting capital improvements - Keeping your building up to date and budgeting for these improvements helps with the over all morale of the building and helps keep your building at market rents. Too many landlords let their buildings slide. make sure you keep good improvement budgets to keep your building running properly. Everyone hates cash calls.
When one of the students asked why John doesn't like to leverage his buildings to the maximum, John replied one of the wisest answers I've ever heard “The only (real) way out of this stuff (commercial real estate) is to be six feet under”. Commercial real estate can be very hard to sell, especially if you ever get under water or create a huge tax liability for yourself. If you do decide to take on this kind of asset class, make sure you are ok with the possibility of never selling the building - commercial multi units are not a flippers game. Remember, investing is a serious business and it's always easier to be out of the market wishing you were in, then to be in the market wishing you were out.
Thanks for reading,
Stefan Aarnio
freedomway.ca
Photo left: John Brauc and Stefan Aarnio
Today, I'm writing from my hotel room in Chicago, IL at Mini-Mega Partnering hosted by JT Foxx. This event is full of great content and I'm meeting some amazing investors and business people.
One of the local investors I met today is a veteran investor operating in Chicago by the name of John Brauc of Key Capital Partners (http://keycp.com). John has extensive background owning, acquiring and operating properties in the Chicago area for the last 23 years. I'm 26 years old today so John has been investing in real estate for almost as long as I've been alive. John was originally a Rich Dad student. Later, he became a JT Foxx student and now he is a trainer for JT Foxx and owns/manages around 30 properties and over 500 doors.
John is an expert in multi-family and shared with us 15 creative ways to increase the cash flow on any property. Some of these tactics and strategies will apply to some properties and not others, but it's always a good idea to have ways to increase the margin on your properties because as John Says: "Each multi family property is a business... NOT A PASSIVE INVESTMENT".
Here are 15 ways to increase the cash flow on any property:
#1) Increasing rents - This one is a no brainer, just make sure you don't get greedy and go too far over market without increasing value or your vacancies will get out of line.
#2) Make tenants responsible for their own utilities, electric, cooking gas, heat, and water - When tenants are responsible for their own utilities, they think twice about leaving the lights on and the heat high. Accountability brings responsibility.
#3) Purchase your own Coin-op laundry - John manages mostly C class units and coin op laundry is a beautiful ALL CASH money maker. Other ways to increase laundry revenue are soap dispensers. On B class units, I like to install in suite laundry for a premium on the rent.
#4) Storage lockers and charging fees - Storage is a huge business in the USA and Canada, people will pay irrational prices to store their junk. Storage is very cheap to set up and fairly easy to manage. This is a great way to utilize wasted basement space.
#5) Charging for parking spots - Parking is an excellent money maker. John likes to separate parking from the lease so that he can take away parking should a tenant go delinquent. I like to include parking with my leases and make an "all inclusive package". Figure out what's best for you.
#6) Installing proper heating controls - Tenants who can easily control their heat will manage their utilities better.
#7) Insulate and air seal roof cavities - John is a fan of insulating roofs because it helps make his buildings run more efficiently. If the tenants are spending less money on heat, then they have more dollars to pay rent. It's good customer service and it makes sense.
#8) Insulating steam pipes and domestic hot water supply lines - If you have a boiler, insulate the lines to increase efficiency. Boilers can be very expensive to operate and they are usually paid by the landlord.
#9) Window Replacements - Window replacements can often be financed through utility loans or financial incentive programs. This raises morale on the building, makes the tenants happy because it reduces drafts and makes the building have great curb appeal.
#10) Weather stripping around entry doors - This one is self explanatory and can often be over looked by most landlords.
#11) Balancing steam systems - Keep your mechanicals in top shape, adjust your sensors make sure everything is running properly.
#12) Installing fluorescent lighting - Low efficiency bulbs can save hundreds on electrical bills over time.
#13) Energy incentive programs - Seek out every grant, tax and incentive program to reduce energy. There are numerous programs in every area and take maximum advantage of these.
#14) Challenge tax assessments every year - Every property owner complains about rising taxes. John appeals his tax assessments every year and wins concessions. This is a brilliant move because he hires his lawyers to do the appeal and pays them a percentage of his tax savings.
#15) Scheduling/budgeting capital improvements - Keeping your building up to date and budgeting for these improvements helps with the over all morale of the building and helps keep your building at market rents. Too many landlords let their buildings slide. make sure you keep good improvement budgets to keep your building running properly. Everyone hates cash calls.
When one of the students asked why John doesn't like to leverage his buildings to the maximum, John replied one of the wisest answers I've ever heard “The only (real) way out of this stuff (commercial real estate) is to be six feet under”. Commercial real estate can be very hard to sell, especially if you ever get under water or create a huge tax liability for yourself. If you do decide to take on this kind of asset class, make sure you are ok with the possibility of never selling the building - commercial multi units are not a flippers game. Remember, investing is a serious business and it's always easier to be out of the market wishing you were in, then to be in the market wishing you were out.
Thanks for reading,
Stefan Aarnio
freedomway.ca
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