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How To Become A Landlord - Articles

3 Creative Strategies to Instantly Increase Your Rental Income

Date: 14/11/2014

A few months ago, the ATO released their 2011 to 2012 taxation statistics. I’m sure you were waiting with bated breath to be enlightened by their findings.

According to one summary of their report, the average Aussie property investor lost $4,146 for the year. Their stats also revealed that 66.8 percent of all property investors were negatively geared. Each of them lost on average $10,895 for the year.

Steve McKnightIn Steve McKnight’s Property Apprenticeship, one of our primary initial pursuits is to help investors break free from the mindset that leads so many down this path of losing money.

Even for those who start the course already holding low-yield properties, Steve teaches some highly practical strategies to help investors increase rental income immediately on their rent properties. As the ATO has revealed, the average investor needs all the help they can get.

One of our graduates who took action on Steve’s strategies is a Melbourne-based investor named Con Kalavritinos. When Con started the course, like many others he had two rental properties, both returning relatively low yields.

One property was a two-bedroom unit in Thornburry earning 4.2 percent gross. The other was a house in Northcote earning 2.7 percent gross.

The only reason these properties were not negatively geared was because his LVR was very low, at around 31 percent. After implementing only three of the strategies that Steve teaches, Con turned his annual cash flow around by a total $4,524. Doing this not only reimbursed him for the cost of the course fees, but these strategies also continue to pay him year after year.

Con was kind enough to allow me to ask him a few questions, so that I could share his valuable experience with the PropertyInvesting.com community.

Interview Questions and Answers With Con Kalavritinos

Con Kalavritinos1. Con, Can You First Give Us A Summary Of Your Three Strategies?

Sure. It was very simple really.

  • I increased the rent.
  • I negotiated a lower fee with my property manager.
  • I negotiated a lower interest rate with my lender.

The beauty of applying Steve’s strategies is that it shows how in any situation you can increase your cash flow with some quick and creative thinking.

2. How Exactly Did You Go About Increasing The Rent? Sometimes Tenants Aren’t Too Happy About Paying Their Landlord More Money.

Increasing The RentThe house in Northcote was easy because it was due for an increase anyway. That one was renting at $730 per week for a while, but the market changed.

After pointing to the CPI and providing evidence of increases in land tax and rates, I told the agent it was time to raise the rent to $760, and she made it happen.

Steve teaches that it’s important not to grow complacent, but to train your tenants to expect regular increases in their rent. Otherwise, if you wait too long, you’ll need to increase too much all at once to catch up with the market. Smaller regular increases are a much easier pill for tenants to swallow.

The unit in Thornburry, however, required a little more creativity. I learned in the course that sometimes you might need to add value for your tenant before asking them to pay more rent.

The tenant wanted a new air conditioner in the main bedroom. I agreed to that on the basis they pay me an extra $15 per week. The agent backed me and sold it easily to the tenant. The A/C unit cost me about $1,500. But, it is making me an extra $780 per year. That’s a solid return on my investment.

All up, I improved my annual cash flow by $2,340 just by raising rents.

3. Walk Us Through The Process Of Negotiating Lower Management Fees. How Did That Conversation Go?

Negotiating Lower Management Fees

Basically, I told my property manager that I was speaking to other agents in the area who offer the same, if not even better, service. I was currently paying my manager six percent.

I made it clear that two other property managers in the same area were ready to take my business at five percent on the basis that I give them both properties.

To avoid losing me, my agent immediately lowered the fee to match the five percent offer. This saved me an additional $624 per year in management fees.

4. Your Third Strategy Was To Bargain With Your Lender To Lower Your Interest Rates. Was That Easy To Do?

strategyYes, it was quite simple. I had my loans with a traditional bank at an interest rate of 5.3 percent. I did some research by speaking to a few mortgage brokers and familiarising myself with other competitive rates.

Once I knew which lenders were offering the best rates, I went back to my bank to sit down face to face with someone. I wanted to put them on the spot.

Once I put the facts on the table, they had no option, and they instantly matched the best rate at the time, which was 4.9 percent. When you’ve done your research and confront them with the cold hard truth, it’s difficult for them to push back. Otherwise they risk losing you.

This 0.4 percent decrease in interest is saving me an additional $1,560 per year.

5. One Final Question: What Would You Say To Anyone Who’s Contemplating Enrolling In Steve’s Property Apprenticeship Course?

final question

The practical assignments simply force you to learn. It covers all facets of successful property investing. The course notes themselves are to be used as the Bible. You can always go back to them.

Once you begin to apply the theory to the practical research assignments, and then follow through into your real life opportunities, you’ll be surprised at how quickly you improve your communication and negotiations. You’ll become proficient without feeling overwhelmed.

Without Steve’s course, I’d still be throwing blind swings. It provides real clarity, direction and sanity.

In Summary

Con took action on three simple strategies, and in a matter of six weeks, he increased his rental income by $4,524 per year. The average investor in Australia is losing $4,146 per year, which means billions are being left in the coffers of tenants, property managers and banks.

What Are You Doing Now To Increase Your Skill As An Investor?

Today Con has moved on from a simple buy and hold strategy to focus on more quick cash deals, like subdivisions and developments.

Having coached him for the last year, I can tell you that before Steve’s course, he had nowhere near enough confidence to even consider these more advanced strategies. Now they have become his standard.

If you’re looking to learn practical actionable skills, but also need to massively boost your competency level as an investor, let’s catch up for a chat. Follow this link to set up an appointment with me, so that we can talk more about whether Steve’s course would be the right choice for you.

Profile photo of Jason Staggers

By Jason Staggers

Jason is a personal mentor for Steve McKnight's Property Apprentices. He has helped hundreds of investors apply Steve's teachings in the real world and achieve greater results on their journey to financial freedom. To learn more about Steve McKnight's Property Apprenticeship course, click here.

Comments

  1. Profile photo of Coatesman

    Great article – and proof. I applied same strategies of increasing rent – wasn’t getting market rent… who knew???
    Then discounted the rate of the property managers fee and finally re-financed my portfolio. Turned my portfolio from negative over -$300 to positive cashflow over $400 per month – a $700+ turn around.

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  2. […] wrote a few months ago about one of the students I coached in Steve’s Property Apprenticeship course who took matters […]

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