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One Rule All Landlords Must Remember

One Rule All Landlords Must Remember

The AirBnB owner in the photo takes my advice to real estate investors to the extreme: Maximize the ratio of rent checks collected to land area owned. Renting out a tent on a day-to-day basis definitely does that.

Here’s the thing, just like anything else, when you cut up real estate into smaller units, you get more for the same thing. Just like, say, chocolate bars – you can get more for each bar selling them individually than you can get for selling them by the box. The trade off is entrepreneurial effort it takes to do that, but for a lot of investors, it’s worth it.

 

But there’s an important difference between real estate and chocolate bars:

  • Two people can share the same element of a property, but they can’t share the same piece of a chocolate bar.

The existence of multistory buildings is a testament to that fact. The tenants share the same piece of land – but they don’t pay less for sharing that land.

The emergence of dorm-style apartments with shared kitchens tells us that many tenants are open to sharing other elements of a dwelling too, and so the investor effectively rents out the same kitchen to multiple tenants. Those units rent for a discount, but the math works out to the benefit of the investor’s bank account (and the tenant’s too!).

So, if you’re not shy about putting in the work, look for ways to rent more units from the real estate you own. Look for shareable elements or cut up what you own by renting smaller units or renting for shorter periods. Makes sure what you’re doing is compatible with your local legislation.

For Ottawa residents, I’ve published a great entry:

 

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John Castle

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