How Do Landlords Make Money (2019 Guide for Investors)
Landlords can make money a variety of ways. The main way a landlord makes his/her money is from collecting rent from the tenant occupying the real estate property.
Since there are different types of real estate, tenants paying rent to landlords aren’t always just people living in houses.
Landlords can collect rent from farmers who rent the land for farming. Landlords can collect rent from businesses like Amazon who rent office space.
Landlords can make money collecting rent from oil companies who drill for oil on the real estate property owned by the landlord.
So while the above methods have so far been about rent collection, let’s also talk about other ways real estate investors and landlords can make money.
Rental Property Income Sources
Here are several income sources that can be created by a landlord with a rental property, like a house or apartment unit.
If a tenant fails to pay rent on time, a landlord can charge a late fee like $25 or $50 and this can be escalated to a daily late fee where you get $25 per day that the rent is late.
So if a tenant doesn’t pay rent until 10 days past due, the landlord could earn income of $250 from assessing a $25 late fee for those 10 days.
Landlords also have the right to charge pet fees in their contracts with tenants. While many landlords choose to allow NO PETS in their property, some landlords do allow pets but for a fee.
The fee could be annually like $600 paid upfront or charged monthly with the rent like $50 per month extra for each pet.
It’s also common in the industry for a landlord to charge a security deposit. This is upfront money that is usually equal to the amount rent is per month (i.e. $1,000).
Security deposits serve a number of reasons like protecting against a tenant skipping out on paying rent. Or more commonly, to protect against damages caused by the tenant to the property that will need repaired.
If the tenant is a quality tenant and doesn’t miss rent payments or cause harm to the property, then landlords should return the security deposit at the conclusion of the lease.
However, if the tenant caused damage, then this could be a source of income for the landlord to off-set the cost of hiring contractors to come paint, fix drywall, fix flooring, etc. in the property.
Another source of income for a landlord is charging for parking. This is usually more common for apartment complexes as opposed to single family houses.
With multi family real estate, there is usually limited parking so landlords will charge parking permit fees and assign parking spaces to tenants.
This fee helps cover the maintenance costs of keeping the parking lot in good shape. Lighting, blacktop / asphalt repair, new lines painted, new curb stones, lawn mowing around the parking lot exterior, etc.
Percentage of Business Sales
This source of income for a landlord is usually common in retail real estate and commercial real estate.
A landlord can structure their lease contract with a tenant to include a fixed rent per month plus a percentage of that tenant’s business sales revenue as part of the total rent owed to the landlord.
For example, a clothing store in a retail property might owe the landlord 10% of it’s $30,000 in monthly gross sales, meaning the landlord collects $3,000 in addition to any fixed rent being charged.
Real Estate Investor Training Course
Join my top selling course that has received tons of positive reviews from students and countless thank you emails. Inside you learn everything you need to know to succeed as a real estate investor. We cover it all. From financing deals to finding deals to legal stuff, goal setting, business plans, property management, exit strategies, and lots more.
Learn Real Estate Investing in 10 Days
Learn the 10 basic steps to becoming a real estate investor by signing up for my free 10 day email course. Each day I'll send you the next lesson.