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Rental Rates & Terms

It's Not Just the Rent That Makes You Money

Don’t overlook the revenue a building can earn from parking, laundry or other amenities.

Look for ways to pull more revenue out of a property.  Rental units many times are not performing at their peak levels. Either the management company is not doing a good job, perhaps the owner doesn’t live nearby and can’t check on the building or the owners are happy just not having any problems and know many of the tenants.  They've become less concerned with maximizing their returns on this investment - a good type of property to buy.

Sure, you don’t want to come in and disrupt a smooth running apartment, but it is a business, so you have to maximize what you can earn per unit, in time rents have to be brought up to market rates.

There’s a lot of truth to tenants referring other tenants, you of course want to keep your tenants happy.  If you’re going to raise rental rates, it’s a good idea to make improvements to the property, to justify the increase, even if the market itself is demanding the increase, you want to keep your tenants happy overall.

But as an investor analyzing property, don’t take rental rates at face value.  Take a closer look and compare the rates to buildings nearby.  This is how you can find a diamond in the rough, or a building with legacy tenants that are paying low rents.  This is not an easy transition, but it could be worthwhile to buy the building and pay off the long term tenants in order to raise the rents to market value.

The state of the property and its owner says a lot. They might not be able to make repairs and tenants are leaving, and then new tenants are less apt to rent at this property, so vacancies are high.  The owners have other debt and need to sell.  In truth, they’d like to retire and divest themselves of the property. It’s all about what the owner needs and what you offer when you're looking to buy from them.

Rent Control:  Is there a rent control map?  What areas are under rent control?  Ask these types of questions when doing your research.

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