Rental properties in the residential, commercial, and industrial sectors are popular investment options in Australia. The landlord demographic is also diverse, ranging from homeowners renting out a spare room to earn passive income to seasoned investors with impressive portfolios.
Whatever type of rental property owner you are, it must have been a tough year for you. Among all real estate ventures, the rental property market took the biggest hit from the global coronavirus crisis. The mass layoffs and pay cuts, the exodus of students and young professionals from the CBDs to affordable outer neighborhoods, and travel and immigration restrictions have led to massive vacancy rates.
Fortunately enough, government stimulus and programs have helped keep the industry from crashing, so recovering your losses in 2021 and beyond may not be harder than you thought it would be.
One efficient way to accelerate your recovery and grow your rental income is to create sources of ancillary income or services and features in your rental property to supplement rent. Whether you’re still looking for land for sale to develop or already have multiple rental properties, here are practical (and ethical) examples you may consider:
1. Laundry facility
It’s good to have washers and dryers and dry cleaning and ironing services in multiple-family rental properties. Laundry is always essential, so instead of having your tenants go elsewhere to do laundry, offer the service yourself. You can lower labor costs by using the self-laundry model, make sure your tenants are using these machines properly to avoid hefty maintenance and repair costs.
2. Convenience store
A convenience store is another good source of extra income in your rental property. Tenants would appreciate having a place to buy snacks, coffee, toiletries, and even alcohol without them having to drive and leave the property. People will always put a premium on proximity and convenience.
3. Parking/bike storage
Parking spots are a luxury nowadays, so if you have some space to accommodate a few cars, charge your tenants for it. Parking slots should be outside their rent because maintaining these spaces and keeping cars secure and damage-free requires time, effort, and money. You can also include a bike storage facility to attract cycling tenants. If you have tenants with bikes, they’ll be more than happy to take it out of their homes as it can be a bulky eyesore when indoors.
4. Pet rent and deposit
There’s no contesting that a pet-friendly rental property is more expensive to maintain. For one, you need to keep common areas clean and free of pet waste at all times, and you’ll have to deal with neighbors complaining about allergens and noise. Plus, having a pet increases the likelihood of damage to the units and common areas. Thus, it’s only wise to charge tenants with pets a small fee. Just make sure to communicate this properly, make it an official policy, and be transparent about the breakdown of costs. And of course, do keep your promise of keeping the common areas clean and orderly.
5. Fitness center
Setting up a fitness center may come with big upfront costs, but it will pay off eventually as fitness and health are increasingly becoming more important to people. But if it’s beyond your budget, you can just set up cheaper alternatives such as a yoga studio.
Not a lot of rental properties offer Wi-Fi in common areas. Encourage people to go out more while earning extra income by offering Internet in the common areas or install connections in units before they move in and add the fees to their monthly charges.
Do you have extra storage units on your property? Include storage services as people would always need to declutter their space. But you’ll need to install individual units with security features such as CCTV cameras and locks, so take those into account, as well.
8. Miscellaneous services
Other potential sources of ancillary income include concierge services, access to the pool or roof deck, clubhouse fees, trash recycling services, pest control, repairs, renovation, and so on. You can also place a vending machine in the lobby, set up display advertising in elevators, and valet trash.
Ancillary income is basically non-rent fees that you charge your tenants for using amenities and services outside of their contract. But it can also include fees stated in the contract, such as late payment fees, admin fees, maintenance fees for shared amenities and common areas, and so on.
The important thing is that you communicate this with your current and future tenants and use legal avenues to promote and offer these services. The trick is to charge money for services that will improve your tenants’ lives and stay away from punitive fee-based charges, as these can rub tenants the wrong way and influence them to move out.