At the macro level, real estate investing is about building equity. Capital appreciation and consistent cash flow can't always be counted on, but over time, you should be able to use rents to pay down the debt on properties and build equity in them.
One way to do that is to use little things to increase your cash flow. These three methods to do so can all add a little boost to your monthly rental income.
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1. Renting to pet owners
I do this in each of my properties. We tack on an additional $85 per month rent and double the required deposit. Because I lived in each of my rentals with pets (two dogs, two cats, and one infant human!), there isn't much new long-term damage that can be done to the property by pets that didn't already happen and got fixed by me.
The key is to find issues quickly. My property manager has someone inspect the property once a quarter, and anything that is damaged from the pets is fixed immediately, and the tenant is invoiced. That said, it's still possible but unlikely that there will be some sort of unseen travesty that happens to the property because of the pets that we can't bill the tenants for.
So the formula for success is: Collect a large security deposit, do inspections often, repair issues and bill the tenant right away, and profit.
If you follow this formula, you won't have to spend any extra money, except for in rare outlier incidents, and you can beef up your monthly rental income. It's even better if you find good, long-term (like 10 years-plus) tenants because you won't have to worry about steam cleaning the carpet or replacing the drapes every year.
One more note: Make sure your tenants are following any relevant homeowners association (HOA) rules. Some HOAs have pet size rules, for example. And you may want to prohibit certain types of pets -- you don't want to open the door for an inspection and be greeted by an alligator.
2. Renting to smokers
The incident that drove me to use a property manager was a tenant who roughed up the property and smoked in it the whole time he was there. The lease, of course, prohibited smoking, but I wasn't doing inspections (no time with four animals in the house), and there was no way to prove it after the fact.
After the tenant left, we had a decision to make: Do we go all in on making the property a smoker apartment, or do we clean up as well as we can and rent it to someone new? We ended up going with the latter and spent around $1,500 to clean up the place and make it rentable again.
Making it a smoker apartment, however, was a valid option. First, we wouldn't have had to spend $1,500 to clean it. And allowing smoking would have increased the rent by even more than the pet fee.
In the end, the long-term problems made it not worth it for us. But if you own a house that has already had years of smoking in it, or if you have a contact who does smoking remediation, it could be worth it for you to rent to a smoker for an additional fee.
3. Lawn maintenance and snow removal
Once you've leveled up to renting single-family residences with a yard, it's important to include language in your lease that requires lawn maintenance. You don't want the tenants to leave you a dead lawn or 800 pounds of dog poop, and you don't want complaints from the neighbors that could end with rentals being banned in the neighborhood.
Alternatively, when you go over the lease with the tenant, use that line to pitch them on an additional $50 per month for lawn care and/or snow removal. The fee means you'll come over once a week and take care of the mowing and shovel the driveway in the winter. It gives you a little extra income and another chance to take a look at how the tenants are caring for the place.
The best part is tax write-offs. Any lawn equipment that you purchase can be written off on your taxes, as long as it was purchased for business purposes. The gas that it takes to haul the equipment to your rentals can also be written off. And best of all, if you have kids to whom you would be paying an allowance, you can have them do the work, pay them an allowance, and write it off as payroll expense.
Be creative
These three ideas aren't the only ways to increase your rental income. By running a rental business, you are an entrepreneur -- so be entrepreneurial. You can charge for applications, furnish the apartment and charge for that, add a shed to the backyard and charge for its use, add coin-operated laundry -- the options are only limited by your imagination.
