JF1321: Squeeze More Cash Flow Out Of Your SFR?s with Al Williamson

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I'm Joe Fairless, and this is the world's longest-running daily real estate investing podcast. We only talk about the best advice ever, we don't get into any of that fluffy stuff. With us today, Al Williamson. How are you doing, Al?
Al Williamson: Wonderful! Thank you, Joe. It's so good to talk to you again.
Joe Fairless: Nice to talk to you too, my friend. A little bit about Al - he was a previous guest on the show, and I'm gonna ask the Best Ever listeners to think back a long, long time ago... It's episode 53. It was October 26th, 2014.
Al Williamson: Wow!
Joe Fairless: Holy moly! October 26th, 2014, episode 53, titled "Cashing in on revitalized areas." If you just search "Al Williamson Joe Fairless", you can find that episode. Today, Best Ever listeners, it's a skillset Sunday day. We're gonna be talking about the skill of ways to get more cashflow out of a single-family property.
Al is the founder of Leading Landlord, which helps rental owners find new cashflow streams. He is a civil engineer and the author of Building Wealth With Inner City Rentals. Based in Sacramento... With that being said, Al, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Al Williamson: Okay, Joe. First of all, let me say I'm so proud of you, for you sticking to your dreams and really mastering your craft now. You are just excellent! You've come so far from our first episode. So polished.
Joe Fairless: I appreciate that. And if you listen to episode 53, you will hear a noticeable difference, I expect. I can't listen to it, because I'll just cringe hearing myself. You did great, but I'm sure I'm terrible.
Al Williamson: So for me, in 2008 I had this apartment complex that didn't have tenants that paid rent... So I started this quest of figuring out how I was gonna pay the mortgage without relying on my tenants, because I just did not want to give the place back to the bank. I was so involved with the neighborhood revitalization (that was my first book), and getting these drug dealers off the streets, and trying to bring jobs to the neighborhood... That was so rewarding, Joe, just like flipping a house is rewarding... Making a difference to a neighborhood is to the X power, right? It's just so rewarding.
I didn't wanna give it back up, so I started this quest of collecting ideas and even inventing some ideas on how to make more income without relying on your tenants. So tenant-independent income streams, as well as getting more spread out of what you already own... Because my credit cards could only take so much, so I had to figure out --
Joe Fairless: Well, you have my curiosity piqued, so please continue.
Al Williamson: Okay, so I figured it out and I wrote this book called "40 ways to increase the net income of your rental property", and I kind of wanted to share with you five ways out of the 12 different batches of ideas that I came up with... Hopefully your users can just start brainstorming with this and come up with an extra $100 or $200 per month.
Joe Fairless: Yes, please.
Al Williamson: Okay. So the buckets that we wanna talk about that you can envision - let's just talk about single-family homes, because that's probably the hardest type of investment to come up with ancillary income... So if we can do it for a single-family home, we can definitely do it for multifamily, or one of those huge apartment complexes like you have.
So you can envision your single-family investment as a transportation pad or as a broadcast station, but you can also think of it as a hospitality center, or an ad agency even, an ad platform, or a storage facility. By thinking of it as the uses that it has, when we put on those different lenses and look at your investment, we see these different opportunities. So which one do you wanna dig into first?
Joe Fairless: Well, let's just go in order - broadcast station.
Al Williamson: Okay. So broadcast station - I set up a big Wi-Fi antenna on top of my building. My building was one of the tallest in the area, and I realized that they had commercial antennas that can broadcast Wi-Fi a half mile radius. So the goal was if I could resell Wi-Fi using a coffee shop type model where you go to Starbucks or your local coffee shop and they give you free Wi-Fi in exchange for you buy coffee, right?
Joe Fairless: Yeah.
Al Williamson: It's complementary, so you can provide Wi-Fi complementary; that's a common business practice. I was gonna sell a newsletter delivered by e-mail about what's going on into the neighborhood, people would pay for that and I would give them Wi-Fi complementary... Do you follow what I'm saying?
Joe Fairless: I am, and that's not the direction I thought you were gonna go. Very, very interesting... So you were gonna create a newsletter with community information that's hyper local, and then as an add-on bonus, you say "Oh, by the way, pay for my newsletter and you'll get complementary Wi-Fi."
Al Williamson: That's right. That would have brought in $2,000/month if I would have captured everyone in my area. That was my first major failure, because the trees - Sacramento, California is known as the city of trees, and I had landscape interference... So I am waiting for a different type of technology to come out before I relaunch that. But it can work for different areas... If you are up on a mountain, Wi-Fi falls in the shape of an umbrella - it goes out and then it drops.
So if your single-family home is up on a hill, you definitely have some opportunities to do that, especially in a desert area.
Joe Fairless: Why not just charge for Wi-Fi and have the newsletter as a bonus? Why did you lead with the--
Al Williamson: Well, that's illegal to resell Wi-Fi.
Joe Fairless: Oh...
Al Williamson: Just a loophole.
Joe Fairless: Okay, I'm with you.
Al Williamson: Because everyone can understand a coffee shop, and even if you walk in a Home Depot or anything like that, they allow you to use their Wi-Fi signal.
Joe Fairless: Alright. We are going off-roading with the brainstorm stuff; I like this a lot, interesting.
Al Williamson: That's it. These are things you can do with your single-family home. You consider it as a tripod for different things. Even a tripod with ad agency; if you drop down there, you have billboard opportunities on your property, as well as on your rooftop if it's visible by a highway, whatever your traffic count is. You've seen even nice benches with advertisements on it, right Joe?
Joe Fairless: Yeah.
Al Williamson: All those things can be done when you start looking at the traffic count exposure that your place gets, as well as how it can be seen or branded. Even our president is showing you that naming rights is valuable as well.
So I wouldn't cancel that out... You definitely need to think about those advertisement opportunities that you have. Outdoor advertising is a huge industry.
Joe Fairless: Wouldn't there be a lot of code restrictions for slapping a logo on your roof, or painting your house a certain brand, like a tagline for a brand, things like that?
Al Williamson: You know, there are, and there's always loopholes, Joe. That's what's great. Because they give you so many days, if it's a political year... What you can do - you can rack up a political -- local donations or contributions... Either taking a contribution or creating a large deduction for yourself for so many days before a campaign.
Joe Fairless: Okay.
Al Williamson: Also, the stores - if there's a local mom and pop store and you have a bench, if they're sponsoring a bench that's in front of your place... Or even I've seen fences - I've got lots of pictures on my website as well - advertising the nearby store. So people monetize their fences as well. So there's plenty of outdoor advertising opportunities.
And some cities have more stricter codes than others. If you're in a rural location, it's just like the Wild West. So billboards - absolutely; it's a good way to get $50 to $100/month, depending on your traffic count.
Joe Fairless: What about hospitality?
Al Williamson: Hospitality -- it's really easy... With your existing single-family home, you can compete against other landlords if you choose, or you can compete against hotels and extended stay hotels, and go after their guests, and make 3-5 times more just by doing that. So we think of Airbnb and BRBO, but you can also go really hyper-local and serve the businesses that are around you.
I have a whole community that just does that - we go after and compete against the evil, dastardly extended stay America... My biggest enemy.
Joe Fairless: [laughs]
Al Williamson: Did you know, Joe, that 36% of all the travel in the United States are people staying 1-6 months?
Joe Fairless: Okay... I did not know that.
Al Williamson: So there's that huge opportunity there. This is a big, big opportunity. You've heard of digital nomads... I think you're probably a digital nomad, aren't you?
Joe Fairless: I don't know, it depends on how it's defined...
Al Williamson: You're settled down now, now that you're married...
Joe Fairless: Yeah.
Al Williamson: But lots of people like to travel with their laptops and do different things, so more Tim Ferriss juniors are out there...
Joe Fairless: As far as the hospitality goes and competing with the extended stay guests, everyone's heard of Airbnb, but you said you go hyper-local and serve the local businesses around you... What do you mean by that?
Al Williamson: Let me tell you about Reuben, for example. He's in Florida, and he said "Al, there's nothing around me. I can't do travel nurses like you do, Al." I often take care of local hospitals, travel nurses... And I said "Reuben, just go talk to the businesses that are around you." He says, "All that we have is a flight safety school." I said "Take them a gift basket, go in there..." So he did, and the owner of the flight safety school followed him back to his place, signed a six-month lease and told him he needed 60 more units to take care of his people coming in for training.
So I tell people all the time -- it's like, catching your own typos is nearly impossible to do, but there's people... If there's a hotel in your town, and especially in extended stay America or an extended stay hotel, there are all kinds of business travelers coming in for training, for HR training, for relocation, insurance issues where they're temporarily relocating... Your local theater has a whole cast coming in... It's in this.
I like to say that opportunities are as large as the sun. There's just no way to define it all, there's so much going on, right in your own community.
Joe Fairless: You mentioned storage facility.
Al Williamson: Storage facility is interesting... I'd like to break it into two categories. There's will you allow your tenant to have additional storage outside of their property, like in your yard, or in a garage? And my favorite is creating a storage facility that someone who doesn't rent your dwelling can use... And they can access without cutting across your tenant's property or inconveniencing your tenant. Like, off of an alleyway or a part of your fence line you have some storage.
The reason being is people nation-wide -- it's about $1/square foot per month for storage, and you can easily set up a 200 square foot or two 10x10 storage units with roll-up doors for about $5,000, and that 200 square feet will bring you in $200/month without much at all
So people have the opportunity to go drive five miles to a big institutional, commercial storage, or they can just drive down the street and put their stuff in your place. Much more convenient. Huge value opportunity.
Joe Fairless: Have you done that one?
Al Williamson: I started it, but I sold the place that I was gonna use... But some people in my community are doing it quite a bit.
Joe Fairless: Can you give an example? I know you just conceptually did it, but can you think of an example of someone in your community who's doing it and just tell us a little bit more about it? Like numbers, and things like that.
Al Williamson: A company called Roost -- I can't remember who bought them, but they were the Airbnb of storage. They allowed people to set up spaces in their garage that they could rent out. There's a number of companies now, they have competitors; I haven't tracked it... But there's an Airbnb of storage, if you follow what I'm saying. If you have extra space in your garage, you can just look them up and see what's going on. And also Craigslist has a storage section, where people rent out places to park your RV, or store your things... So it's whatever you can negotiate on Craigslist as well.
Joe Fairless: I did not know that.
Al Williamson: But if it's covered and weather-protected, you can pretty much ask for I think $1/square foot.
Joe Fairless: And that's in most markets?
Al Williamson: Yeah, that's nation-wide average.
Joe Fairless: Okay, got it. And I think you mentioned there were five categories or five ways. So far I've written down broadcast station, hospitality, ad center, storage facility. What's the fifth?
Al Williamson: Transportation hub. One person in our community, he rents one parking space in his duplex to Zipcar, which is a car sharing company... And he brings in $250/month for renting his parking space. Other people around his area - they have access to that shared car.
Also, there's just creating a parking space on your lawn, just kind of extending your driveway with some drive strips, and allowing people to park there instead of beating the meter on the street, or... Depending if you're close to a downtown area. That can bring you $30-$50/month or more.
Where are you now? Are you in Denver, or are you--
Joe Fairless: I'm in Cincinnati.
Al Williamson: Cincinnati, okay. So if you're by a stadium or things like that, where parking is a premium, or even a downtown business center - anywhere there's paid parking or meters around, or even where you need a permit, there's opportunities to monetize your lawn, so to speak, providing parking.
Joe Fairless: I know that the tactics are very thought-provoking, and I think a lot of people's wheels are turning with "Okay, how can I maximize the earning potential of my property?" And I believe the thought process that you're talking about or that you're using is more important than the tactics. I'm mentioning that first, before I ask the following question, because I understand that it's more about how can you maximize the income through these creative methods, but here's my very tactical question...
Al Williamson: Okay.
Joe Fairless: And that is I'm thinking through -- so I've got three houses in Dallas-Fort Worth; so I have apartments, but I also own three homes. I'm thinking through these things, and I can't think of one that wouldn't really upset the neighbors and/or the tenants... Like transportation hub, for example. Renting out a parking space to Zipcar. It sounds great in theory. We fall over ourselves trying to get an increase in rent every year - or I do - of 3%-5%, but you're telling us a way that someone's getting $250/month; it's incredible. But then I'm thinking, man, if I looked outside my window and I just saw people all hours of the day and night coming in my driveway, going in the car, music's blaring or maybe it's not, I don't know, but there's strangers in my driveway, as a tenant, I would have an issue with that.
Al Williamson: Joe, you've really hit a great point, which is crucial to when I was putting all this together... And that's how we partner with our tenants. We're traditionally adversarial and not so much joint venture-minded when it comes to landlord/tenant. So if your tenant is the type where you could joint venture into them, where they share in some of the revenue stream, however you decide to split it... But if it's in their best interest, then all those issues fall away.
Joe Fairless: Yes, they do. The only thing that surfaces in that scenario would be legal issues, and I imagine that's where you wanna have a good attorney to draft something up... But more importantly, you wanna make sure that they understand what they're getting, you understand what you're getting, and it's transparent.
Al Williamson: Let me give you a practical example.
Joe Fairless: Yeah, please.
Al Williamson: Okay, there's a lot of cities that are coming out with ordinances against Airbnb if it's not your primary residence. Especially in San Francisco area, we have some people in our community that are doing an innkeeper type of arrangement with a tenant that they place in there. They'll have a tenant take care of all the bellhop and maintenance and housekeeping duties, and the owner takes care of the front desk duties, let's say with the Airbnb. And that whole venture works because it's through that partnership or through that tenant who lives there full-time; that's their primary residence. It allows them to get through that loophole. And the tenant wins because they potentially have opportunities to greatly defray the cost of their rent, and almost live rent-free, almost house-hack. So the more is rented, the less rent they pay.
Joe Fairless: What's a typical percent split that you would do with a tenant?
Al Williamson: I didn't actually pull it off with my place; I got close. It was where I wanted to -- if it was filled 20% of the time, let's say 20 days, we would reduce 50% of the rent, so to speak... Just enough so that they have some interest in it, and make them part of it.
If you could get it so that they could completely cover their rent, that'd be even better if the numbers work. It depends on the size of the place.
Joe Fairless: I'm gonna venture a guess that the most profitable of these that you've done or seen done is the hospitality category, where you're renting it extended stay, versus these one-off things. First off, is that correct?
Al Williamson: I can't say, because there's different startup costs. One of the most profitable things is to rent someone else's place and run an extended stay operation from it, an arbitrage that way... Because you're protected against your maintenance costs, and you can quickly break even and just really have nothing but cashflow.
Joe Fairless: Yup, and the only thing you risk is whatever lease that you sign with the landlord.
Al Williamson: Yes, and that's limited, because if your extended stay operation doesn't work, then you just fall back into long-term furnished rental, or even if that didn't work, you fall back just to breakeven just renting his place for what it costs. So you have two safety nets underneath you.
Joe Fairless: And you wanna be transparent and forthcoming with the owner, the landlord, prior to signing the lease.
Al Williamson: Yes, everything has to be done with high integrity, absolutely. For that particular one, showing the landlord the benefits of you taking even better care of a place than he could possibly, because your self-interest is making sure his place looks and works and functions awesome, so that you don't get phone calls. Also, maybe that landlord can reduce or eliminate their management company. That's 8% savings there.
Joe Fairless: Al, you're working a different side of my brain than I usually work on the interviews, and I really am enjoying it, so thank you for sharing these ideas - a lot of the ideas I've never heard of before - and categorizing them and then giving us some examples.
How can the Best Ever listeners learn more about what you've got going on?
Al Williamson: The best place - I keep all my writings and what I'm learning and the current research I'm doing... I'm a landlord scientist full-time now; I kind of hung up my civil engineering hat now... It's at leadinglandlord.com. You can see what I'm doing, what I'm working on... Last year, for example, we were trying to figure out how to make one rental property generate enough money so that it could replace a mid-level job. We started off not knowing, and then we've figured out... We turned that one into a short-term rental and safer profits, and then [unintelligible 00:21:58.03] And I'm actually living off that experiment just to show people the journey, and I think we'll hit $10,000 in 15 months; we're well on our way.
Joe Fairless: Outstanding. Well, I highly recommend going and checking out leadinglandlord.com, learning more about these tips and these practical ways to win -- or to... I was gonna say win, but you really are winning... To earn and increase the income for your property. We were talking single-family, but it's clear there's an easy extension to commercial, and it's actually easier for commercial than single-family.
So from the ad center with the billboard naming rights, maybe branding a fence, to the storage facility, transportation hub with Zipcar, and then the broadcast station... I'm really interested to hear how that goes when that gets executed. But again, it's not necessarily the tactics that I suggest being focused on, it's really the mental approach for thinking about different ways to earn income, and just thinking a little bit differently, or a lot differently than what's typical... Because there are ways to do it; it's just a matter of executing, and then also testing, too. I'm sure there's gonna be some testing involved, and seeing what works best for your particular property in your area.
Thanks for being on the show. I hope you have a best ever day, and we'll talk to you soon.
Al Williamson: Thanks, Joe.