How to Increase Revenue for Your Residential Rentals

Property management businesses relying solely on rental income may be able to maximize their earnings potential by diversifying their revenue streams.

Offering additional fee-based services to tenants can help you pull income from a variety of sources. This, in turn, can decrease your reliance on profits stemming from rental income alone. If you're looking to branch out and wondering how to increase revenue in property management, consider the size of the rental community and potential services you can offer.

Leasing fees

Leasing fees help you recoup some of the costs associated with finding new tenants or granting exceptions to a standard 12-month lease. Set your fees at a comparable rate to other property management companies in your local area. Examples of leasing fees include:

• Application fees: Asking for a fee to process an application won't make you rich, but it will help you cover the costs of tenant screening. It may also help to weed out tenants who are unsure about moving forward in the leasing process, which allows you to focus on the most serious candidates.
• Short-term leases: If you permit tenants to rent on a short-term basis, you may charge an additional fee or increase the monthly rent by a stated amount for this accommodation.
• Furnished units: Tenants may be willing to pay extra for a furnished unit.
• Pet fees: Experienced property managers understand the additional costs of renting units to pets, and many charge a pet fee for cats and dogs. Currently, 66% of US households own a pet, meaning around two-thirds of people are likely willing to pay extra for housing that will accommodate their pets.

Leverage communal spaces

For additional revenue, consider using communal spaces, such as a clubhouse or a rooftop deck. Rent the open space for parties and provide the supplies needed, such as tables or chairs. Organize community gatherings in indoor spaces, parking lots or outdoor courtyards. You can host local businesses and sponsor events such as job fairs, farmers markets or craft shows. Partnering with other businesses or charging exhibitors' fees can also help generate revenue.

Optional services

Now is a good time to diversify property management income by adding services for tenants that aren't typically covered under a lease agreement. A report from the Better Business Bureau shows that demand for property management should experience a 7.5% compounding annual growth rate from 2022 through 2027. Make your property stand out by offering services and amenities that others aren't.

As a manager of multiple properties, your company may obtain preferred pricing on certain items, such as high-speed internet. Present these services to tenants in a way that clearly states the benefits of the offer, such as added convenience or lower pricing.

Upscale amenities

Residents may be willing to pay extra for access to an on-site fitness center, premium parking spots, a pool membership or other upscale community features. Rather than adding the cost of such amenities into everyone's rent, you could decide to break out these items and charge only the residents who want to take advantage of them. This way, you can keep rents lower while diversifying your property management revenue streams as needed.

A la carte services

Charging fees for assisting tenants with items such as bulk trash removal, seasonal lawn and garden care, HVAC filter replacements or other minor repairs can also help you diversify income. These chargeable services should be for items that are typically the responsibility of your tenants. You can set charges based on the frequency of the request and the typical costs of providing the service.

Managing HOAs or condo associations

Many residential communities are formed with a neighborhood association to ensure that the property is maintained in a satisfactory manner. A board of directors made up of residents will contract with a management company to assist with duties such as enforcing community rules, maintaining common spaces, and carrying out administrative or accounting tasks. Property management companies can further diversify their revenues by bidding on these contracts.

If you choose to pursue this line of business, review the bylaws of the association, the community's budget and the property management agreement before accepting the position. Make sure you thoroughly understand your obligations should you decide to pursue this income-generating activity.

Property management companies should focus on adding value to tenants in rental communities. It can be a win-win situation. You'll diversify your revenue streams and be able to provide better amenities for your tenants. Plus, by creating fee-based activities, residents who enjoy those amenities pay for them while those who don't want to use a pool or fitness room don't have to shoulder the costs. These other revenue streams allow your company to maintain the property in excellent condition while still keeping base rents affordable.