Adding Value to Multifamily Properties
How do you add value to a real estate investment?
This is done in a variety of ways and for a variety of reasons. Each year smart property owners will try to find feasible ways to increase the value of their property, so their initial investment grows. When this can be achieved with limited cost, it is a win-win situation for Investors.
As a property owner, you control the cash flow and your NOI by increasing the income and/or decreasing expenses. When you make physical improvements there will be months when expenses are higher than income but if you can continue to find a mix of upgrades that do not cost too much, you will be able to raise rents and will see a higher ROI year after year.
When to Add Value
Not everything has to be at the same time. This list of 10 ways to add value to your property shouldn’t be overwhelming. Rather, take a couple of suggestions and break them down into manageable actions you can handle at one time. When residents see that you are actively working to improve the property, even if they don’t see the changes right away, they will be more willing to sign or renew a lease at a higher price.
Ways to Add Value
Here are 10 ways to add value to your multifamily property:
- Interior unit upgrades. This will vary by the type of property. As a Class A property, these upgrades may already be a standard amenity while a Class C property may not have the space or ability to add upgrades to every unit. Some ideas for upgrades would be built-in microwaves, dishwashers, washers and dryers, wood floors, LED lighting, and even upgraded bathroom features. For a Class A property, these are probably already present in the units so why not look for a high grade of material? For B and C type properties, you generally will not choose the most expensive appliance brand but rather something that fits the property class.
- Technology improvements. This type of improvement will range from smart thermostats, energy star appliances, better cable packages, and higher speed Wi-Fi.
- Up daily practices. It’s no secret that maintenance requests and rent payments are two of the most common aspects of tenant life. Owners expect rent to be paid on time and thus they should make sure maintenance requests are addressed quickly. If you can make those two tasks simpler for residents, by using online tools, they will appreciate that, and you will have a digital trail to follow for accuracy.
- Improve security. Consider using keyless fobs for doors, gates for parking, and secure doors in common areas. Keyless is a great way to go as the actual lock will not need to be changed but rather just the programming. A parking garage or parking area with a gate is not foolproof but it will help deter some criminal activity.
- Increase pet amenities. Pets are family members. The more pet amenities offered, the more the resident will feel as though management wants to create a home for them and their pets. Having a dog park, grooming stations, or if you don’t have the space, offering a discount on mobile dog groomers that come to the complex weekly, will be something pet owners will love. In 2021-2022, it was estimated that 70% of Americans own pets.
- Offer higher-end amenities. This type of improvement will only make sense in certain areas with certain types of properties. If you have a Class C property, asking residents to pay for valet trash or concierge services may not be the best move for adding value to your property but for Class A and B assets these make sense and increase ROI. Other types of amenities you can consider adding are cleaning services, dog walking, valet trash, personal fitness sessions, car detailing, food truck service, and so much more. Be sure it is something your residents would actually like. For example, if you have a young demographic, they may not appreciate paying extra for cleaning, but busy professionals would be more willing to sign up for that type of service.
- Improve curb appeal. First things first, a clean and organized exterior will be the best option for any and every property class. You don’t need to spend money on fancy flowers or outdoor décor, having a clean property is one of the easiest and cheapest ways to add value. If you have the budget, adding some flowers by the office door or planting some trees around the property will help to increase value.
- Update common areas. Is the printer in your business center always out-of-order? Are the treadmills broken? Do the pool chairs have missing legs? Take the time to make sure those types of items are well taken care of. Even if they are simple, they should work and be an asset to the property. Fostering a sense of community will encourage tenants to renew leases rather than moving on.
- Implement water saving tactics. This will decrease monthly expenses. Using less water to maintain landscaping will allow you to charge residents less for water when the building is on one meter and being able to charge residents a bit less for water usage can be one of the best ways to reduce your turnover rate and thus improve the value. Other ways to reduce water cost is low flow toilets, rainwater collection, and even xeriscape as the preferred landscaping choice for the property.
- Parking improvements. Parking at multifamily properties is notoriously a headache. There aren’t enough spaces, there aren’t enough covered spaces, the covered spaces are too small, and the list goes on. Take the complaints from the residents and check into how you can make it better. If you can find a way to create more covered parking and then charge for it will increase revenue. You might be able to add more spaces by better using poorly used space. Adding lighting and security so that residents feel safe will lead to lower turnover and a willingness of residents to pay higher rent. Even if you add security patrol only at night and rely on cameras during the day, that sense of security will go far in the minds of your tenants.
While not every item on this list is feasible for every property, we are sure some of it is possible at your property. Adding value doesn’t necessarily have to be expensive or take months to complete. People who live in multifamily housing have some basics that they require and if you can achieve that and then go above some expectations, you’ll have the ability to incrementally raise rents to increase the property’s income.
Choosing the right areas to add value can have a significant impact when it comes to increasing the potential of a property. At Summerfield, we have experience in these matters and would love to help you add value to your property.