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Smart owners exploit every opportunity to maximize their net operating income and create new, leverageable equity. Small changes can generate millions of dollars in cash flow and add value as you grow your CRE portfolio.
I have built an 18-year track record of success as a professional investor with the help and guidance of mentors who are legends in our business. Some of my favorite and most effective tips are listed here.
There are tips on how to tap into the wealth potential of commercial real estate.
There is an area of 24 square feet that can be carved out with minor alterations. If you own a property that has commercial space or is located in a busy area, you should consider putting an ATM in it.
Most markets in the U.S. require an area of 4'x6' for an average ATM space to lease for $500-1,400 per month. For 24 square feet, that's at least $6,000 in yearly income.
In areas with a lot of pedestrians, an ATM lease could bring $1,200-1,400 per month, which would translate to an equity increase of up to $420,000. If you want to place an ATM in your location, you need to talk to your bank. Property owners can install an ATM machine of their own and collect fees on cash withdrawals, but it takes a lot of hands-on management.
The cash flow may seem insignificant, but vending machines can add equity to a property. Machines with card readers are more desirable. Income and profit can be tracked with credit-debit purchases.
Purchase machines or lease them A monthly lease can start at $50. Most products have a profit of 50% or less. If you have two machines, one for snacks and one for soft drinks, you could sell 300 items per month at an average profit of $0.75 per item. The gross income is $225 a month and the net income is $125 a month. The property has a potential net equity gain of $20,000 if a net annual income of $1,500 is taken into account.
Many manufacturers will either sell or finance equipment. There are vendors that offer state-of-the-art machines with good terms. All the stocking and maintenance of your property will be handled by third party vendors.
There is a step-by-step guide for how to start investing in rental properties.
Property owners in older apartment buildings with no washer and dryer connections can convert unused space in the building into a laundromat.
We converted an empty crawl space into a laundry room during the renovation of an old student apartment building. Most of the units in the building were two bedrooms and 48 people lived in them. The simple amenity generated a lot of money. An instant equity gain of over $200,000 was achieved by the extra $12,000 a year.
Financing or lease options for laundry equipment are available from most suppliers. Major home supply retailers can be used to purchase coin-operated washers and dryers.
A few years ago, I bought a church building for $860,000 and used it as my church. The building is 6,000 square feet and is located on a busy corner near a lot of retail. I bought the land for the purpose of demolishing the building and developing a five-story mixed-use property. There is an underground parking garage in the existing building.
We rented out the parking spaces so we could pay the property taxes and carry costs. We generated $2,100 in monthly revenue by renting 21 spaces to nearby businesses for $100 per month.
If we kept the building as a rental property, the extra $25,200 per year would translate into $560,000 of additional equity in the building, which would make up two-thirds of the $860,000 I paid for the entire property. Due to the demand for land, it may be difficult to buy a parking lot, but you can look for properties that have extra off-street parking. It can provide a boost to your bottom line.
There are 6 key questions you should always ask before investing in a commercial real-estate property.
It takes 50 square feet for a cell tower to be installed. As many as five carriers and 15 other digital antennas can be supported by one rooftop tower. On a 50% split with the supplier, that's $6,000-7,000 a month. The extra $72,000-$84,000 per year would result in an equity increase for the property of up to $2.1 million.
To gauge demand for a tower on your property, contact American Tower, SBA and Crown Castle. The revenue split on the income from AT&T, T-Mobile, and other carriers will be part of the lease payment structure.
A freestanding cell tower can be placed in a 100'x 100' space. Some footprints are as small as 50'x50'. If you can create a section of 5,000 to 10,000 square feet, a cell tower can potentially make more money than the property itself.
Depending on population density, rental income or profit sharing on a traditional cell tower can be between $3,000 and $8,000 per month. In the event of a sale, even nominal income from a cell tower lease can have a big impact on your equity position. Cell tower operators can tell you if there is a need for additional coverage where your property is located.
Huge differences in property valuations, asset equity and the owner's net worth can be created by small changes to cash flow.
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I fell victim to an online scam that cost me $300.
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