Rental Income Update
With the lackluster dividend income last month, the real juicy part of April 2016 is in my rental income.
I managed to increase one of my unit’s monthly rental income to RM800 (previously RM700 per month). An additional RM100 translates to a hefty 14% increase the unit’s passive income. I stand to earn an additional RM1,200 per annum thanks to a few changes I made to the property and also a few well placed and not to mention FREE ads.
How I did it
First things first, the aforementioned property is Property A in my Real Estate Portfolio. It all started when I was notified by my lawyer and close friend that Property A’s tenancy will be approaching its one year deadline soon. I as the owner had the option to increase the rental for another year’s renewal. I happily surveyed online property sites and noticed that rental rates are going for RM750 semi furnished for similar properties around the neighbourhood. A perfect opportunity for me to increase my rental income, or so I thought.
I proceeded to contact the tenant and told him I’d like to revise and increase the rent to RM750, thinking it was no big deal. He called me back a day later saying he and his mated are opting to vacate the unit. He will be leaving on the 18th and will be forfeiting the rental he had already paid for April. We are on good terms and he had no issues handing over the keys to me earlier, I was of course devastated and sad to see such a good paymaster go.
In hindsight, this was actually a blessing in disguise as I had the right idea when I decided to further furnish my unit. I decided I could ask for RM800 a month in rent if I could advertise the unit as fully furnished (other fully furnished units were going for RM850). I already had the living room and bedroom covered. As luck would have it, I was able to furnish the unit with second-hand refrigerator and air conditioner. Both cost me nothing as the fridge was from my aunt and the air conditioner from my parents’ house. I re-labelled the unit for rent as fully furnished and the calls and texts came pouring in. I advertised on various sites but found that I got the most responses from Mudah.my.
I at first was worried that I wouldn’t be able to rent out the unit by April and considered using the services of some real estate agents. However, after a few unsuccessful viewings and upon learning that they’d take a month of my rent from me, I instead chose to just spend some of my time showing the unit to potential tenants on my own instead. I had to tag along every time a potential client is brought by an agent anyway. I’ve estimated that I spent no more than 20 mins per visit (I live nearby) and I’ve done almost 10 visits before the right tenant came along. All in all, that’s 200 minutes spent to get and additional RM100 a month in passive income. Not too bad in my books.
A further side notes on my experiences with some unscrupulous real estate agents, once you post your own ad on sites soliciting for tenants, you will inadvertently receive multiple calls and texts from agents wanting to assist you with ‘ready tenants’. They will then ask for photos of the unit from you and then guess what they do? They re-post your unit on the sites. Some of them even had the audacity to re-post my ad with a lower rental -RM750 for example. The only recourse I saw for such actions was an angrily drafted email to their respective agencies. You have no idea how mad I was when I saw their ads. Lesson learnt, never send photos of your unit to real estate agents, if you have to, make sure they don’t repost on sites you are already advertising on.
As for the tenancy agreement, I got my solicitor to draft a simple and standard one with a clause for a 10% increment in rental every year at my discretion. It was free of charge as she has been my attorney for many years and you won’t believe the legal fees she has earned from me through out the years. The market rate for a standard tenancy agreement should be around RM100 – 200.
So, as a conclusion:
- Survey the market for up to date rental rates;
- Source for free furniture and appliances from family members, if unsuccessful, look for second hand deals;
- If you have time, conduct viewings yourself, post your ads online and be careful of agents; and
- Establish and maintain a good relationship with your tenants.
I can’t stress point number 4 enough. Treat your tenants right, even the ones that are leaving. You never know, they might refer future quality tenants to you. Although maintaining a positive relationship with a tenant is crucial, I am always strict on rental payments and it is something I emphasize both verbally and in writing.
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