Rental premiums are worth a ton more than cash

One of my coaching clients asked me how come I suggest that real estate investors charge their tenants above-average rents apart from the obvious reason–to make more money and get a higher ROI.

Here was my answer:

Hi E, good question.

One of the main reasons I raise rents is to keep bad tenants out. Seriously.

Having said this, when one of our tenants wants something done, we hop to it.

When prospective tenants ask me why our rents are higher than our competition, I tell them the above–that they’ll be getting a highly responsive landlord. And guess what? They almost always totally buy-in…

If they’re still doubtful, I might add something else–a rental premium.

Believe it or not, I will offer some of our tenants a breakfast with me. They often find that a useful thing if, for example, they’re looking for career advice, a new JOB, some life or business advice.

I also have on occasion offered them access to our lake—for example, Shaun likes fishing (see below)!

Or I may also offer them copies of one of my  books, https://brucemfirestone.com/books/.

I’ve even offered a “follow” on twitter too.

One time, a tenant (a super nice young person who was Ubering back and forth to work) got one of our old cars (for free). It was worth maybe $400 but she really appreciated it. It was heading for the wrecker anyway.

Lastly, I’ve sometimes included https://www.prestocard.ca/en/ presto cards with $10 on them as a starter… so they can get around on the bus or light rail if they need to or one of their guests needs to.

SO, THE QUESTION IS: WHAT INNOVATIVE PREMIUMS CAN YOU OFFER???

You see premiums (stuff/things/branded promotional items) are remembered for much longer and are much more appreciated than cash as in say a month’s free rent.

If you are renting a place for, say, $1,500/month, that’s a lot more than a breakfast with Prof Bruce, although some people have told me that (the
latter) is priceless.

Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD, Ottawa Senators founder, Real Estate Investment and Business coach, ROYAL LePAGE Performance Realty broker, 1-613-762-8884 bruce.firestone@century21.ca twitter.com/ProfBruce profbruce.tumblr.com/archive brucemfirestone.com

MAKING IMPOSSIBLE POSSIBLE

postscript: some additional thoughts and suggestions–

OTHER RENTAL PREMIUM IDEAS?

-a free Costco membership

-a tech package/multimedia package

-a vertical garden on the balcony or even indoors

A client of mine who develops student housing writes: “I also offer my student renters free cakes or pizzas (per person, once a year) to celebrate any important life milestones (birthday, graduation, job promotion, etc) with other students living in one of our properties. It’s a gift that’s not only appreciated, but helps promote friendship and improve the social environment in our homes,” Bee

DON’T GIVE AWAY A FREE MONTH’S RENT—THIS IS NOT HIGHLY VALUED AND WILL BE QUICKLY FORGOTTEN…

Let me give you an example… a client of mine was having trouble renting her office/co-working space even if she gave away one, two or even three months free rent which could cost her thousands of dollars and still so takers.

I got her into giving away a premium instead.

She owns a pub and music venue seconds from her offices. She started to give away $25 gift coupons for free food and music (once a quarter) redeemable at her pub. It was crazy. $1,000 to $3,000 in free rent was valued less than a $25 coupon. She rented her space no problemo after that.

Here’s an email message I recently got from a realtor, which clearly demonstrates: HOW NOT TO SELL OR RENT

Sorry to bother you I just wanted to grab your attention to this listing if you know anyone WHO MAY BE INTERESTED… OFFERING GREAT INCENTIVES: UP-TO 4 MONTHS FREE, DISCOUNTED RENT FOR 2 YEARS FOR INITIAL SETUP AND RAMP UP. GREAT LOCATION RETAIL SPACE FOR LEASE. NEAR HIGHLY POPULATED AREA WITH LOTS OF RESIDENTIAL BUILDINGS AROUND. BASEMENT IS FREE: PAY FOR 2800 SQ FT BUT USE 5,600 SQ FT TOTAL. BASEMENT IS GOOD HEIGHT CEILING WITH 2 BATHROOMS & TWO ENTRANCES TO OUTSIDE PARKING.

Can you imagine the cost of giving away half your space then discounting it further with 4-months free rent plus a lower rate for the next 2-years? A rental premium would be much more effective in my experience…

MORE EXAMPLES OF RENTAL PREMIUMS THAT WORK

Another client of mine owns a self storage business; he gives away a free garden plot exactly the same size as the storage unit his clients rent—so if someone rents a 10×10 shed, they get a 10×10 garden plot; a 10×20, they get a 10-x20 plot; he even turned this into a biz—he’ll raise fruits and veggies in your garden plot for you for a fee and either you harvest them or he will for another fee, all you do then is pick them up

Another client offers a $25 gift certificate every quarter to shop at a nearby farmers market

Yet another client of mine offers either a free meal every quarter to her student tenants (which she cooks herself and brings over–young people are always hungry) or 2 hours of free tutoring in mathematics per quarter, which, BTW, she is excellent at…

Warby Parker

If you know Warby Parker, a direct-to -consumer seller of cool eye-wear startup valued at $1.75 billion according to a vox.com report (https://www.vox.com/2018/3/14/17115230/warby-parker-75-million-funding-t-rowe-price-ipo), their business model is evolving to include not only great design and awesome service but now monthly subscriptions for contact lenses plus real world stores that include additional services, most notably optometrists and eye exams.

This is the biz model of the future–internet presence, real world presence and adding more services to your product operation or more products to your services business. Right?

Upper East Side, NYC

So, I asked myself this question: How can we add more services in the real estate industry to our product (ie, residential or commercial rentals)?

Well, maybe cool apartments might come with ca free registered massage from time to time, some tutoring, meals, coaching (!), personal shopping, cleaning services, yoga class, personal trainer, a workshop/makerspace, extra storage space, moving help and so forth.

Maybe your office space or retail space could come with a microsuite, a spa, a play area, an outdoor meetup space/patio, and a bazillion other things…

THERE IS ENDLESS CREATIVITY TO BE APPLIED HERE, WHICH WILL BE HIGHLY VALUED IN THE MARKETPLACE

Image source: By Ajay Suresh from New York, NY, USA – Warby Parker, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=79681129