Landlording Niches to Maximizing Rental Cash-Flow

The ideal way to maximize cash-flow with rental properties is to provide a superior product, customer service, and a reputation of strong character.  It is the art of renting that provides the delicate balance of providing a good product and a referral pipeline that efficiently fills vacancies based on your reputation while achieving an acceptable rate of return on your time and money (without over-improving).

I received alot of flack for my last article “Setting Rental Rates for Maximum Cash-flow I”.  The intent of that post was to provoke thought and to bring out those who cannot understand that ‘Tenant Turnover’ maybe their true cash-flow problem -that needs more scrutiny towards the root cause. I contend that more often than not, a landlord is pushing the upper end of the rental range for a neighborhood and his customers (tenants) are voting with their feet -remember not all neighborhoods are the same.   I often find it takes science and art to find the sweet spot of plugging one’s rental property portfolio into a consistently cranking cash-flow machine.

So what are the goals to achieving maximum results?

  • Fit and Finish near the mid to upper range of the neighborhood
  • Prompt and professional response to maintenance & management issues
  • Consistent professionalism with honoring your agreements and word

In general,  a landlord that provides a good rental home in comparison to his/her competition, has a reputation for keeping their word, and puts all agreements in righting has the ability to consistently achieve the top end of the rental price range for the neighborhoods they invest in.  Sort of like the old saying: “What comes around goes around”.   This can work (and does) against you too -often those whom skimp, do shoddy work, and leave a trail of unfulfilled promises find that their rentals transcend into a spiral that conjures up thoughts of the traditional ’slumlord’.

I think there is one major part to the art of landlording that truly kicks the theory of maximizing one’s cash flow into high gear.  Landlords who specialize in target marketing to attract and focus on specific market niches. These are the landlords whom discovered that certain types of housing tends to perform best when a certain target market is reached.  Some of these niches included:

  • Senior Housing
  • Student Housing
  • Low Income Housing (non-subsidized)
  • Subsidized/Section 8
  • Creative Loafers
  • SRO’s
  • Boarding Houses
  • Professionalized Housing

Landlords who can identify and attract tenants that fit niches coupled with good customer service and rental housing tend to achieve the upper end of the spectrum (when quantifying the success rate). When one can specifically target a niche market, the odds of improving a tenants ‘contentment’ with a home directly correlate to achieving above average rent and lowered turnover.  Take ‘professionalized housing’.  I happen to manage property near a major hospital.  These multifamily homes tend to attract roommates (or couples) whom are nurses, doctors, or in administration.  The turnover and vacancy downtime tends to be low do to a competitively priced rental with good amenities, and a reputation of prompt attention.  Often the tenant moving out or another refer a fellow co-worker -think that would happen if we provided an inferior product and didn’t respond to maintenance requests? -absolutely not.

Now if your having trouble filling your rentals, one has to take an honest look at what issues the property, neighborhood, or even (you) the landlord has that is causing longer than usual vacancies and excessive tenant turnover. I encourage you to read my “Tenant Turnover” article and the prior “Maximizing Cashflow” that I mentioned above.  There are certain properties and neighborhoods that create greater than normal challenges: one needs to identify how to steer away from them and/or zoom in on a target market to improve its performance.  Figure out the niche and you’ll be on your way to maximizing cash-flow.

Tyler McCracken -a NC Real Estate Investor

September 1st, 2010

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