168. How to Increase Multifamily Income Without Taking on More Risk

🏘️ How do you increase cash flow on a small multifamily property without taking on massive renovation costs or unnecessary risk?

In this episode, we break down a repeatable strategy for increasing small multifamily cash flow by combining 🏡 short-term rentals with 🏠 long-term tenants.

We walk through a real Snellville Quadplex Case Study that increases monthly income from roughly $6,000 → $9,000 while keeping renovations, risk, and workload under control. 📈💰

🔍 In This Episode:

• 🧩 Why many small multifamily deals look “broken” on paper—and how creative strategies can fix the numbers
• 💵 The quadplex case study, including the market rent gap and income potential
• 🛠️ How to use seller credits and reserves to renovate only two units
• 🏡 Converting two units into short-term rentals to increase income quickly
• 📈 Raising long-term rents through renewals without renovating occupied units
• 🔄 Moving short-term rental units back to long-term rentals once the property stabilizes
• 🧾 Cost segregation basics for mixed short-term and long-term use—and why you should involve your CPA early
• 🤝 Negotiating vacancy during due diligence and sequencing renovations one unit at a time
• ⚠️ When this strategy doesn't work, including HOAs, local regulations, management intensity, and weak unit comps

📞 Want Help With Your Next Deal?

If you want to move forward, feel free to book a strategy call with us.

👉 Go to cabbahome.com or click the link below to book your strategy call. We're happy to walk through the numbers with you.

💼 Looking for an investor-friendly CPA? Shoot us a message and we'll connect you with the CPA we personally utilize.

📑 Bring us your next contract—and let's look at the numbers together.

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Niyi Adewole is a licensed realtor in Georgia, brokered by EXP Realty. Feel free to reach out at Niyi.Adewole@exprealty.com if you would like to work with an investor friendly real estate agent.

Transcript

Why Hybrid Rentals Fix Deals

SPEAKER_00 0:05

All right, guys, we're gonna get started. And today is the talk about layering short-term and long-term rentals to maximize your cash flow and make an investment work. And I'm gonna use one example of a property, a quadruplex I've talked about a lot on the podcast and on the mastermind that I bought back in 2023, where I was able to take the money that it was making from $6,000 to $9,000 in a one fell swoop with a strategy that I used here by layering in some short term with the long term on the small multifamily. And so when you look at uh what you're gonna walk away with, first we're gonna talk about the problem, right? There's so many small multifamilies that look broken on paper right now. And that's because the values have increased over time, right? And it's up to us as investors to be the creative ones to help turn a deal that looks okay into a great deal. When you look at the deal that we're gonna talk about, I bought a quadplex in Snellville for 800K a few years ago. And at the time, when it was rented, it was renting for $6,000 per month. Now that may not seem like a lot, right? That was one where if that was the median rent or the max good rent for, uh, I probably wouldn't be going for that deal. It's below the 0.8% rule, right? But because the median rent was at $2,000 per unit, or it should have been $8,000 that it was totally rented for, it made a lot of sense to go out there and this thing down. So we're gonna dive into that piece. Um, the play layering in short-term and long-term rentals, the tax kicker being able to use that cost segregation

The Snellville Quadplex Numbers

SPEAKER_00 1:40

to get some savings there, and then the repeatable framework that you can use to make this happen. And so initially that deal didn't necessarily work out. When you look at it, it's $8,000, it's renting $800,000 and it's renting for $6,000. At minimum, I'd want it to be renting for, you know, like $6,400, right? Um, to make it make sense. But with this one, the median rents were really low. The reason they were low is because the previous owner had purchased it for $180,000, right? They had tenants that stayed in there for seven to ten years, uh, and they were renting it for $6,000, basically 3% of the purchase price, maybe a little bit over. So they had no need to increase the rent. They actually liked the rent right where it was. They were making cash hand over fist, and they had the same tenants in there for seven to ten years, and so they were good. Whereas with me, as the new landlord taking over, I wanted to get it to market rent to make it make sense. And also, I didn't want to put all that cash out up front to go ahead and turn every unit at the same time, right? Each unit turned was gonna cost about you know 20 to 30k per unit because these are big units, three bed, two and a half. You want to update a kitchen, update two and a half bathrooms, do some paint. Um, the flooring was fine, but those type of updates cost some money. And so, with that in mind, what I did and opted for is I said, what if I can get a bunch of seller credits from the seller and use that to update one of the units and then

Renovate Two Units For Short Term

SPEAKER_00 3:05

use my cash reserves to update another one of the units. And so what we ended up doing is we actually had um two of the units where we asked those tenants to move out, right? We gave them notice, we did it in our agreement, gave them notice, had two of those tenants move out, and we updated those two units immediately and turned them into short-term rentals. Now, those short-term rentals were able to take the rent from um from you know 1,500 or where it should have been at 2,000 each. And I was able to bump that up to 3,000 per each unit. And so we brought in six grand just on the two short-term rentals, and then we still had the three grand coming from the other two properties, and that helped overcome the gap that we were missing when it comes to having the two units underrented. And I only had to renovate two units. Now, with the other two units, what I've done is slowly over time and over the years, I've raised their rent. Now they're getting closer to market rent, or like right on the precipice of market rent because we've been renewing them, renewing them, renewing them constantly. We've done four renewals now. And so those folks, we haven't had to renovate their unit. They've stayed there and we've just renewed them and increased the price. And now we're on the other side of it, where now we're looking to shift the short term back to a long term. And so the short-term rentals were actually moving back to long term, and we're able to um make it go from uh being, you know, more energy intensive for that short-term rental to really hands-off with a long-term rental that's already renovated. And we don't plan to renovate the other two units until those tenants move out and and kind of go from there. So we're just gonna continue to sit on that, continue to raise the rent little by little to where the pain of moving out and spending, you know, $500, $1,000, you know, $1,500 to gather all your stuff, move out, and then put all these deposits down somewhere else, it is not outweighed by the small increase of $100 to $150 per month. And so when you look at this, this is kind of what it looks like over time. Um, and and you can see this is actually pretty good. So you start making about 13.5% on a property that's gonna give you tax benefits and things of that nature as well. Now we negotiated the vacancy before we actually close because we knew this is was critical for this make it being able to work. And so we put into due diligence that the seller is gonna give notice to these two units that we wanted uh after we got through contingencies, but before closing, so that it would start that time and that when we close, we'd be that much closer to being able to get them out, renovate, and go from

Cost Segregation And Bonus Depreciation

SPEAKER_00 5:40

there. And so it allowed us to raise the rent without too much uh increase in the dollars spent. And then the other piece I wanted to get into is the cost segregation benefit. And so, full disclosure, I am not a CPA. This is not tax advice, and I only learned this after the fact. But if you have a property that is split right between short term and long term, you can take a portion of that property and get tax benefits off of that. And so this was a half-half split, right? 50% long-term, 50% short term. When my CPA found out about this, I was able to do a cost segregation on the property and was able to take that 100% bonus depreciation that was recently reinstated and use it to help me on my taxes, right? Now, what you see on the screen is a couple pieces about what is needed for that. I think at the time it was like 60%, but now it's back to 100% for any properties bought after January 19th, 2025. And they have that in law. Uh, unless somebody changes it, it's in law in perpetuity from now on. And the thing about mixed-use buildings is you can allocate a portion of it based on the property itself. And so when you look at the exit, right, and converting back to a long-term rental, we initially went half and half because the numbers would not work unless I renovated all the units up front. I didn't have the cash for that, but I like the location. It's right next to a Chick-fil-A. I like the property's prospects over time. Now it's worth close to a million, right? Three years later, which is awesome. 200k in equity. And um, and then now that the rent's starting to make sense, I'm converting it back to a long-term rental so I can move all that furniture somewhere else, set it, and forget it. Now, this is how to run the

How To Run The Play Yourself

SPEAKER_00 7:20

play on your own deal. You want to find the comfortable seller, the long hold, low basis, rent's frozen. Find the seller where they haven't put a lot of effort into maintaining that property with the rents over time. Maybe it was not a professional landlord like we are, where every single year we're raising the rent, doesn't matter what it is, we're still gonna raise it at least a couple percentage points. Even if it's 1%, just raise that rent every single year. Check the unit sizes and the rules. You want to see that um some of the units are either small if it's that type of market that you're pertaining to, or bigger units that may stand out, like a three-bed, two and a half out there, especially when all you have is like a La Quinta and uh and those type of hotels as other options um has clutch. We've had a bunch of 30-day stays, 60-day stays, six-month stays um within our units, and people are paying a premium because our units are just much nicer with more amenities than you would get over there in a full-size kitchen. You want to negotiate the vacancy into the contract if at all possible. This one's tough, right? But we typically try and do it during due diligence, not up front, because up front, like the power is still in that seller's hand to say no. Up front, we're going mostly for credits and things to make the numbers work. And then during due diligence, while we can still walk away for any reason, this is when we usually hit them with the hey. We also need you to give notice to vacate to one of the tenants, and we try to get them to do that after contingencies are done so that we can use that within the file. Renovate only what you must, right? You don't want to take on a uh a four-unit renovation with no income coming in. When we were renovating those two units, there was still income coming in, right? And we really did one unit at a time so that we could get that unit up and running and then kick off the next one. And so it's much better and much easier to renovate a unit when you know, hey, the mortgage or whatever is getting covered by some of these other units than it is to try to do it all out of pocket. And then bring in your CPA and have a conversation with them before you close. Talk to your CPA closely about what your strategy is and see if they got any tips that can help you maximize on the taxes. Places where this doesn't work, HOAs, right? They're constantly changing the rules. It may not work for HOAs. Um, cities, you want to work with an investor-friendly realtor so you can know what is going on within your city, right? Uh, short-term is not passive. There's other costs that come into it, right? You're doing cleaning, turnovers, guest messages. It was a little bit easier for us because we own a short-term rental management business, and I have eight short-term rentals now, including these two. And it allows you to be able to uh kind of just plug it into the cog, and it doesn't really cost much extra for me. But for others, you got to factor that cost in too to see if it's worth it. And then for small units, uh, it really depends, right? Like it's if it's a one-one or a two-one, there's a cap on how much that you can make there, unless it's very unique or like in the mountains or something. But if it's part of a multifamily, it's probably gonna be pretty cookie-cutter. And so you want to definitely look at the comps, see what you can pull in. This was one where I took a little bit of a leap of faith, right? There weren't as many comps in this area because there's not as many BMBs out there. But having done many before this, uh, I felt confident

Where It Breaks And Final CTA

SPEAKER_00 10:25

that if we built it, they would come and they have come. And then the financing and the shift, lenders and carriers treat short-term rentals differently. So we have an insurance broker that we work with that we connect all of our clients to. I'm happy to connect you to them as well if you reach out, but they're gonna be able to help you find the best insurance for that property. And from a financing standpoint, same thing. We got investor-friendly lenders that we uh utilize that will be able to find the best investment package for you to put the least amount down and get into that property. When you look at the neighbors and the other tenants, this is really about the neighbors within that multifamily. You want to make sure that you have solid tenants throughout, right? Um, that aren't gonna be uh antagonizing the guests and things of that nature. And vice versa, you want to bet the guests that are coming to stay to make sure they're not gonna make it a miserable experience for the tenants that are here long term. As long as you do those three things, you're gonna be fine. Now, as a finale, right? You want to go ahead and uh book a strategy call, feel free. Go to a cabbahome.com or click the link down below to book that strategy call. We're happy to do that with you. If you want to meet with an investor-friendly CPA, shoot us a message. We'll connect you with our investor-friendly CPA that we utilize, and then bring us your next contract, right? A cabbahome works with investors across Georgia, Florida, and Texas. And we're looking to expand even further from there uh toward the end of this year. And so we'd be happy to look at any deal you have, see if we help you out. If we can't, we may be able to put you in the right direction. So I hope that everybody has an awesome Wednesday and that we continue to strive toward hitting our goals for this year. Thank you guys.