Have you ever wondered how you can create additional forms of income through your multifamily property? We are not talking about parking or storage but about utilities like wifi. Your tenants are already paying for Wifi and cable so why not get a piece of the action? Kevin Gardner President of Multifamily Solutions and Aaron Fragnito, co founder of Peoples Capital Group join forces on a Live Q & A discussion about how landlords can create additional forms of revenue from utilities their tenants are already paying for.
In this live Q & A learn :
1. Additional revenue streams that many landlords are not aware of
2. How you can earn revenue for services your tenants are already paying for
3. Real estate investment strategies to build wealth
4. Paying less taxes through real estate ownership
5. Does this revenue strategy work for smaller buildings?
00:00:00 – 00:01:10
Introduction to multifamily utility solutions
00:00:00 – 00:01:10
The speaker explains that although they do not pay for cable themselves, having a contract is necessary when granting access to personal property. Their services have expanded beyond cable and internet to include utilities such as electric, gas, water, and waste removal, evolving into comprehensive multi-family utility solutions.
00:00:36 – 00:02:50
Profit margins in real estate and increasing income
00:00:36 – 00:02:19
The discussion focuses on the real estate market in North Jersey, emphasizing that property margins are tight despite high purchase prices. Increasing rental income by even a few hundred dollars monthly can significantly impact the property’s overall value due to the way commercial real estate is evaluated—specifically through net operating income and cap rates. Small increases in income lead to exponential growth in property value, translating directly into profit without requiring extra investment beyond tenant payments.
00:01:53 – 00:02:50
The conversation shifts to practical considerations, noting that strategies to increase income work primarily for larger buildings. The speaker introduces a Q&A segment with six questions prepared for Kevin, beginning with an inquiry about the difference between bulk contracts—where the owner provides internet or TV as an amenity—and arrangements where residents pay individually for these services.
00:02:23 – 00:05:46
Bulk contracts vs resident-paid services
00:02:23 – 00:04:16
There are two types of agreements regarding service access on a property. The first is simple access, where a provider like a cable company is allowed on the property, often with some marketing rights, but the property owner does not pay for the service. The second is a bulk contract, where the property owner buys service in bulk and offers it as an amenity to residents. This is similar to investing in other amenities like a workout facility and can add value to the property by attracting residents and potentially increasing rent.
00:03:37 – 00:05:46
The decision to invest in bulk services like cable or internet depends on whether it makes financial sense by enhancing the property’s appeal and generating income. Residents pay for personal service directly, but property owners must have contracts with providers to grant access to the property. In multi-family housing, providers need permission from the property owner to install services, as residents cannot grant access themselves. This creates an additional gatekeeping step to manage service agreements on private property.
00:05:16 – 00:08:37
Minimum units needed for financial viability
00:05:16 – 00:06:54
The discussion focuses on the financial viability of service agreements for properties based on unit count. While 40 units is typically below the threshold for compensation, the speaker recently secured a deal with compensation for a 40-unit property, including $100 per door plus ongoing revenue share. Although the property owners initially felt the amount was insignificant, the speaker emphasizes that every dollar counts. Generally, 100 units is considered the ideal minimum for such agreements.
00:06:24 – 00:08:05
The potential for compensation depends on the property’s location and market competition. Providers in competitive urban areas are more likely to offer compensation agreements, whereas rural areas with fewer providers may not. The speaker mentions that deals have been made for as few as 12 units, often bundled with other properties. Their approach is to always ask for compensation when the property has 12 or more units, as providers may surprise with offers even in less competitive markets.
00:07:30 – 00:08:37
Clarification is given that the companies involved are typically internet service providers offering Wi-Fi, cable, and telephone services. The compensation involves paying landlords $100 per door in exchange for exclusive marketing rights, meaning the provider gains exclusive access to offer services in the property. This exclusivity benefits both the provider and landlord through structured financial agreements.
00:08:03 – 00:14:44
Exclusive marketing rights and compensation
00:08:03 – 00:10:09
The discussion explains how landlords can control marketing by exclusively promoting a preferred service provider through displays or handouts, which is part of a compensation agreement. This includes a one-time payout and ongoing revenue share. Legally, providers cannot charge residents more than the community’s established rate card, ensuring residents are not financially impacted or limited in their service choices. Exclusive marketing rights do not exclude other providers or increase fees for residents.
00:09:38 – 00:11:25
The speaker emphasizes the benefits of exclusive marketing agreements, noting that residents may even receive promotional pricing. Landlords gain revenue from upfront payments and ongoing shares without inconveniencing staff or disrupting residents. The process involves simple marketing materials like flyers or postcards, without requiring landlords to sell the product or allow door-to-door sales, although provider representatives might visit if permitted.
00:10:56 – 00:13:07
Different types of providers are detailed, including traditional cable companies evolving into broadband providers, phone companies, and independent providers leasing dark fiber. These providers compete to offer services like internet, cable TV, phone, and home security in communities. The choice of the right provider depends on the landlord’s goals, property size, location, and investment strategy, which are critical factors considered before making recommendations.
00:12:33 – 00:14:44
For landlords with multiple smaller properties close together, negotiating with cable companies for payouts and incentives is possible if unit numbers collectively meet thresholds. Smaller properties with very few units are treated as residential and typically don’t qualify individually. The importance of evaluating a landlord’s entire portfolio is stressed, with encouragement to always inquire about potential deals regardless of property size, as aggregated units may attract provider interest.
00:14:09 – 00:15:49
Leveraging multiple properties for better deals
00:14:09 – 00:15:49
The speaker explains that the availability and quality of services depend on the providers in the area and the number of clients represented there. Having multiple clients in a market, such as Dallas, Texas, creates leverage and results in more favorable opportunities. The discussion then shifts to the expected income for landlords, mentioning that the door fee for non-bulk deals can vary significantly, typically ranging from fifty dollars to higher amounts.
00:15:17 – 00:20:21
Expected landlord revenue and impact on property value
00:15:17 – 00:16:55
The speaker discusses revenue sharing from providers, averaging about $25 per unit annually, paid quarterly. For a 100-unit property, this amounts to roughly $2,500 in yearly revenue share. They emphasize the significance of consistent, incremental income and relate a lesson from a Comcast CFO about the value of accumulating many small amounts of money.
00:16:25 – 00:17:44
The speaker explains that last year they generated approximately $4 million in net operating income improvements for clients, which translates to an $80 to $100 million increase in asset value at a conservative cap rate. They highlight that the $2,500 per year revenue share adds directly to the bottom line with no additional costs, describing it as extra income that enhances property value without requiring further investment.
00:17:20 – 00:18:40
Using a 5% capitalization rate, the speaker calculates that $2,500 in additional net operating income results in a $50,000 increase in property value. They point out that this extra income stream comes with no extra expenses such as sales commissions, taxes, or insurance, effectively boosting the owner’s bottom line and serving as valuable leverage when selling the property.
00:18:17 – 00:19:34
The discussion continues on how the $2,500 annual revenue can significantly impact property valuation, increasing appraisal value by $50,000 or more. This strategy’s real benefit lies in enhancing resale or refinance value by demonstrating increased net income, which appraisers will recognize, making it a powerful method to add tangible financial value to real estate holdings.
00:19:08 – 00:20:21
The conversation shifts to timing, emphasizing that initiating revenue-sharing arrangements early in the acquisition process is crucial. The speaker recounts a client evaluating a 156-unit property in Kentucky, suggesting that delaying such strategies can result in missed opportunities, reinforcing that it’s never too early to start integrating these income-enhancing measures.
00:19:44 – 00:22:19
Timing acquisition and contract negotiations
00:19:44 – 00:21:45
The discussion covers the discovery of a cable contract during negotiations, revealing that the previous owner and agents were unaware of its existence. The team intervened to stop a transaction that would have redirected revenue unfairly, saving $30,000. Their service model operates entirely on commission, with no upfront fees, meaning clients only pay if they receive money. They act as advocates, gathering crucial information to help clients make informed decisions and identify profitable opportunities.
00:21:15 – 00:22:19
It is emphasized that their commission-based model benefits property owners by eliminating out-of-pocket costs for their services. The conversation then shifts to the impact of a recent FCC ruling, which initially caused concern. However, the ruling aims to ensure residents have options and choices regarding their services, rather than imposing outright restrictions.
00:21:48 – 00:24:36
FCC ruling effects on provider agreements
00:21:48 – 00:24:36
The speaker explains that exclusive agreements with a single provider are no longer allowed, and revenue share models have shifted from graduated scales to flat rates regardless of customer volume. This change promotes consumer choice by allowing contracts with multiple vendors simultaneously. Despite these changes, door fees, revenue shares, and bulk rates still exist, but favoritism towards one provider to eliminate choice is prohibited. Owners can still earn overrides and benefit financially by offering multiple service options to tenants, ensuring flexibility and multiple choices in larger buildings.
00:24:36 – 00:24:36
The conversation transitions to questions from the interviewer about the impact of rising interest rates on real estate investments.
00:24:06 – 00:29:36
Real estate investment strategies amid rising rates
00:24:06 – 00:25:32
The speaker discusses investing in value-add real estate, emphasizing the strategy of buying buildings below market value and increasing revenue through renovations, improved management, and creating new income streams such as charging for parking, storage, late fees, pet fees, and amenities. They describe a current purchase of a building in central New Jersey with rents 25% below market value and plans to invest about 1.1 million dollars in renovations over three years.
00:25:03 – 00:26:26
Plans for the building include renovating units and re-leasing them at top dollar, as well as repurposing underutilized spaces like a gym currently used for storage into amenities that can generate additional rent or add value. The investment approach focuses on leasing renovated units at current market rates, assuming a conservative outlook where rent increases are a bonus but not necessary for success.
00:26:00 – 00:27:35
The underwriting process assumes a cautious market scenario with inflation stabilizing or dropping, cap rates and interest rates rising, and potential market slowdowns. They use stress testing in spreadsheets to model various scenarios, including inflation dropping to 1% or rising to 10%, and interest rates and cap rates increasing, to understand how these changes could impact the building’s value either positively or negatively.
00:27:02 – 00:27:54
The speaker explains the use of an interest rate straddle clause in their purchase contract, which adjusts the price depending on interest rate fluctuations. This mechanism protects both buyer and seller by lowering the price if rates rise and increasing it if rates fall. Given the current market expectations of rising interest rates, this clause is anticipated to favor the buyer as they close on the asset between June and September.
00:27:30 – 00:28:50
Emphasizing conservative pricing and underwriting, the speaker highlights that despite some market cooling due to rising interest rates, demand remains strong, especially in high-demand areas like North Jersey. North Jersey is described as a resilient market hub with consistent demand even through recessions, making it a strategic location for investment. The key is to be cautious to avoid overpaying amid market fluctuations.
00:28:23 – 00:29:36
The conversation shifts to geographic strategy, explaining a preference for investing within about an hour of New York City, including considering Philadelphia due to its potential. The speaker suggests that while New York is often viewed as a prime city, surrounding markets like New Jersey and Philadelphia offer strong opportunities for real estate investment due to their proximity and demand dynamics.
00:29:01 – 00:34:20
Why invest in New Jersey real estate
00:29:01 – 00:30:26
The speaker discusses their real estate investment strategy focused on Newark, Patterson, and Jersey City, emphasizing in-house property management to maintain close oversight. They highlight Jersey’s strong population hubs with high income and education levels, good job opportunities, and persistent housing shortages despite some population loss. This shortage creates upward pressure on housing prices, benefiting landlords.
00:29:57 – 00:31:24
Unlike commodities such as food that can be shipped in to meet demand, housing requires lengthy development processes, including permits and construction, typically taking about three years. Due to slow supply growth, housing demand in North Jersey remains strong. The speaker notes trends of people moving to further areas like West Jersey and Central Jersey, with interest in cities like Trenton and North Philadelphia, where luxury apartments are rapidly leased.
00:31:24 – 00:32:45
The speaker advocates buying properties in familiar markets but acknowledges investing in rural areas can be risky. They share personal experience buying rural New England real estate during the pandemic, which appreciated well, and owning a rural Vermont home primarily for personal use rather than investment growth. While rural investments can be uncertain, emerging markets like Cincinnati and the Carolinas show potential.
00:32:46 – 00:34:20
Focusing on high-demand metropolitan hubs such as Dallas, New York, and Los Angeles or their surrounding areas within an hour’s distance is recommended. The speaker advises against buying expensive Class A properties in city centers, preferring Class B and C buildings in nearby locations for better returns. Regarding property value drops, they mitigate risk by purchasing at discounted prices and adding value through rent increases and operational improvements.
00:33:48 – 00:36:41
Handling property value drops and recession plans
00:33:48 – 00:35:10
The speaker discusses the impact of macroeconomic pressures like recessions on real estate values, referencing the 2008 collapse as a rare but possible event where property values dropped significantly. They explain their strategy of buying mismanaged apartment buildings at good prices with built-in equity and cash flow, acknowledging that property values can drop below purchase price during downturns, which complicates refinancing but doesn’t stop the properties from generating income.
00:35:11 – 00:36:41
Despite challenges such as tenant job loss during recessions, the focus is on high-demand markets with strong tenants, like North Jersey, where leasing is not usually a problem. In cases of significant property value declines, refinancing is postponed until the market recovers. The speaker emphasizes that real estate, especially residential apartments, tends to hold value long term, even through recessions, as seen in 2008-2009. The approach during downturns is to maintain operations, continue collecting rent, cover costs, and wait for better refinancing opportunities.
00:36:10 – 00:40:35
Investor impact if refinancing is delayed
00:36:10 – 00:37:16
The speaker addresses common investor questions about investing in real estate through IRAs or 401k accounts, confirming that about a third of their investors use self-directed IRAs or solo 401ks. They acknowledge concerns about market downturns and reassure that if the real estate market collapses, stock portfolios would also likely suffer.
00:36:43 – 00:38:04
In a scenario where property values drop significantly, refinancing may not be feasible, so the strategy would shift to holding the property, continuing to collect rent, and generating modest cash flow. The focus would be on maintaining the investment rather than selling or refinancing under unfavorable conditions.
00:37:38 – 00:38:34
The approach during a downturn involves maintaining rent collection, paying down mortgages, and improving the property through renovations to increase its desirability and rental income. Even in a recession, rental housing remains a vital commodity as people need a place to live.
00:38:06 – 00:39:05
Apartment buildings are presented as a relatively safe investment during recessions, though investors should expect longer hold periods—potentially 5 to 8 years instead of 3 to 4 years—before refinancing and recouping part of their investment. The market typically cycles back up after downturns.
00:38:35 – 00:39:31
After the market recovers, there is usually a strong growth phase allowing for cash-out refinancing, where investors can get back a significant portion of their initial investment and continue earning cash flow. This cycle extends the investment horizon but provides opportunities for eventual liquidity.
00:39:04 – 00:40:04
Most investors choose to stay invested long term, benefiting from quarterly cash flows and periodic lump sums from refinancing events. The investment strategy includes purchasing properties at good prices, renovating to add value, lowering expenses, and enhancing amenities to attract quality tenants.
00:39:34 – 00:40:35
The speaker outlines the process of adding value and increasing income from properties before refinancing at opportune times. If the market is down, refinancing will be paused until recovery. The segment ends with the beginning of a discussion on investment minimums and accreditation requirements.
00:40:04 – 00:43:46
Investment minimums and investor qualifications
00:40:04 – 00:41:34
The speaker explains that their investment opportunity requires a minimum of thirty thousand dollars and allows both accredited and sophisticated investors to participate. They highlight that the company has its own property management team and focuses on New Jersey properties despite regulatory challenges. Sophisticated investors are defined as those with real estate experience, stable income sources, and who do not rely solely on investment returns for income. The investment approach is conservative, accepting only about half of an investor’s capital to ensure financial stability.
00:41:02 – 00:42:55
The investment qualification process involves a discovery call to discuss the investor’s goals, risks, track record, and the company’s long-term vision. This call lasts about 15 to 30 minutes. If qualified, investors complete a form and gain access to detailed investment materials including webinars, financials, and due diligence documents. The investment paperwork is fully online via Syndication Pro. The speaker notes that investment opportunities fill quickly due to strong performance, often exceeding initial return targets by 30 to 50 percent, which leads to high investor satisfaction and frequent reinvestment.
00:42:26 – 00:43:46
The speaker emphasizes that their success in retaining investors comes from aligning investment opportunities with investors’ individual goals rather than imposing a one-size-fits-all approach. They begin by understanding what investors want and their long-term objectives, which leads to better business outcomes. This personalized approach fosters trust and encourages investors to continue investing with the company.
00:43:21 – 00:45:00
Aligning investor goals and business approach
00:43:21 – 00:45:00
The speaker explains their investment strategy focused on improving mismanaged apartment buildings in high-demand markets through physical renovations and better management, minimizing risk by avoiding ground-up construction or major structural changes. They emphasize aligning investor goals with their approach, prioritizing tenant satisfaction as a key factor for investor happiness. Additionally, they mention offering tenant incentives such as promotions with service providers to enhance tenant experience and retention.
00:44:35 – 00:46:52
Benefits of tenant amenities and good management
00:44:35 – 00:45:55
The discussion highlights how offering additional amenities, such as improved Wi-Fi, can generate extra revenue for both landlords and tenants, creating a win-win situation. Happy residents tend to refer others, attracting good tenants who pay rent on time and maintain the property well, contributing to a positive rental environment.
00:45:28 – 00:46:52
Creating a safe, clean, and welcoming environment is crucial in repositioning apartment buildings, especially those in less desirable locations. By addressing issues like crime and neglect, these properties can become family-friendly and profitable. Surprisingly, the riskiest properties often yield the highest returns when bought at the right price and effectively managed.
00:46:25 – 00:47:28
Creating a safe and profitable living environment
00:46:25 – 00:47:28
The discussion highlights the importance of transforming an apartment into a home, emphasizing that success is achieved when residents feel a sense of ownership and belonging. The conversation concludes with gratitude exchanged between the speakers, and information is shared about how to contact Aaron through his website, multifamilyutilitysolutions.com.
00:46:58 – 00:50:46
Contact information and next steps for investors
00:46:58 – 00:49:00
Aaron provides contact information and encourages viewers to reach out for intro calls to discuss their portfolios and investment goals. He shares a link to their syndication pro website where interested investors can fill out a form and schedule a discovery call. This call is designed to learn about the investor’s goals, explain the real estate investment process, and determine if there is a good fit. Qualified investors, either sophisticated or accredited, can then review detailed offering information and due diligence.
00:48:30 – 00:49:53
Aaron emphasizes that they only work with qualified investors and mentions an upcoming private offering launching next week. He advises signing up early to avoid long wait times for discovery calls, as his schedule fills quickly once an offering is released. He directs viewers to peoplescapitalgroup.com for more resources, including podcasts, blogs, webinars, and educational videos, reinforcing the importance of connecting early to understand investment opportunities.
00:49:25 – 00:50:46
The conversation wraps up with Aaron thanking Kevin for joining and Kevin expressing enjoyment of the discussion. Aaron closes the live stream by thanking viewers for their time and participation, noting the positive turnout. They agree to reconnect for future sessions, wishing everyone a good day and expressing appreciation for the audience’s engagement.
