This is how landlords are putting cash back into their pocket
A landlord’s margins are often shockingly slim. There is a misconception that apartment buildings in New York City generate strong income to the bottom line. This is not necessarily true.
July 14, 2022
While you might have significant equity, from a cash flow perspective, you’re lucky to end the year with anything in your pocket after paying property taxes, other operating expenses, making improvements, and mortgage payments.
Block.a helps landlords keep more rental revenue while streamlining their residential leasing experience in a way renters love.
Let’s look at a typical landlord’s revenues and expenses to see what I’m talking about. For instance, let’s say an apartment is rented for $5,000 per month, or $60,000 per year. All of the income for the first four months of the year from January through April will go to the city in the form of property taxes.
And while the city just taxed 33% of your rent roll away, you still have a lot of bills to pay. You still have to pay your electric bill, your heating bill, your water bill, your building staff, etc. Covering all those costs can easily eat through your next three months of rental income, from May to August.
Suddenly, it’s September, and you still haven’t earned any income from your rental. Maybe you have boiler or roof issues to repair or unit upgrades or repairs. Worse still, maybe your tenant has stopped paying rent, forcing you to eat the costs of operating your building. And given the aging building stock in NYC, you’ll likely also need to come out of pocket to improve your building. So now you’re paying for capital improvements to be done.
Landlords work on razor-thin margins, and most hope to eke out their year’s worth of take-home income in just the last month(s) of the year, assuming they don’t have a big mortgage.
As most owners realize, brokerage commissions come out of the landlord's pocket. Even when the tenant is the one actually paying the fee, a BIG commission paid by the tenant would just reduce the amount of rent the tenant is willing to pay.
To rent your apartment, a broker is either charging you, the tenant, or both you and the tenant, a fee of one month or 15% of the annual rent. A fee this high is reducing your net income.
But there is a way to end the year with a little more cash in your pocket and increase the value of your building. And these numbers can add up very quickly.
Block.a’s leasing platform and fee structure allows a landlord to reduce their leasing costs significantly. By streamlining the leasing process for both landlord and tenant, block.a is able to charge at least half of what a traditional brokerage does while providing a better experience with more transparency.
For example, if a rental broker’s commission is only one month on a $5,000 per month apartment, there goes your income you hoped to make in December. With block.a, that same apartment can be rented for just $2,500, or even less if an owner brings over volume to block.a. The reduced commission keeps cash in your pocket.
Even if the tenant is paying the broker fee, block.a is still helping you to make money.
That’s because it’s a zero sum game. If a tenant were able to save on the typical one-month fee paid to a broker, they would have been willing and able to pay more in rent.
This increase in rent results in a bigger rent roll, driving increased income and a bigger valuation. Using this scenario, if the building is a 30-unit building with a 33% turnover ratio, block.a would be increasing the value of the building by nearly $500,000 without the owner lifting a finger or spending a dime.
Landlords face a lot of unavoidable expenses, but broker fees shouldn’t be what is eating into your year’s cash flow. It’s simple: with block.a you're generating more rental income, optimizing your rent roll, and ending the year with more cash in your pocket.