There are many ways to increase the return from your property investment. Some are common and easy to do like rental increases. Some are harder and take more effort like renovations.
However here is one strategy I bet you never thought of. Use a car to increase your investment property returns.
Depending on the type of property investment you have will depend on how you can make this strategy work for you. And if not a car, think of some other value add for your tenants.
Let’s say you have a 4 pack of units. We have clients with these and they rent well. The majority of them are in the cheaper price bracket as they usually older. Most new sites are going for a higher density so the total cost the won the whole lot is generally prohibitive.
These units on an average, rent at a 5% return. So a $1 million 4 pack of units, can generally rent for about $250 per unit per week ($1000 per week total). This totally depends on the area and other factors like condition etc.
Some of these units can have a high turnover of tenants do to the location they are in or the style of unit or the age/condition. Either way high tenant turnover is not conducive to good cash flow for the owner.
What if the tenants had something that made them stay longer or pay more per week or both?
What if they had the use of a communal vehicle?
This is exactly what one of our clients (Sue) did, so I take no credit for this idea, and it is a good one!
Sue leased a good quality second hand vehicle for around $10,000 – $15,000 it will cost her about $200 per month.
She set up an agreement with the tenants to pay for fuel, rego and insurance and she supplied the vehicle.
In exchange for that a loading was placed on their rent to the amount of $40 per week. The tenants all sign up to this and they now have a share / booking arrangement to use the vehicle. Really it is no different to using the BBQ or function room in a larger complex. The tenants pay for the privilege to be able to use the facility wether they use it or not. And when they want to use it they need to book it out for the duration of intended use.
The figures look like this:
Current rental return $1,000 week (4 units @ $250 per week)
New rental return $1160 week (4 units @ $290 per week)
Added costs $50 week (car payment of $200 per month)
Nett cash flow increase $110 week, $440 month, $5,280 per year!
You have just increased your weekly cash flow by over $100 and provided a unique rental environment that will mean less tenant turnover. So not only have you increased your cash flow you have decreased your downtime and damage from change or loss of tenants. Win – Win!
This type of idea can be replicated on different properties and you don’t need a 4 pack of units to do it. Some of our clients use items other than cars to achieve higher cash returns on their property. It is all about being creative with your strategies.
For more info on this or any of our other Wealth Strategies, simple contact us today.
Scott Northcott
Scott has been instrumental in bridging the gap between financial planning and traditional real estate transactions through his property advice model. By carefully considering his clients’ goals and planning for market changes via demographics and trends, Scott designs a future proof outcome not only specific to the client’s needs but dynamic in its execution with performance indicators and exit strategies built in.
