Multifamily apartment buildings often come with hidden value. Distracted owners and poorly focused, or inexperienced, property managers may defer maintenance, which leads to run down buildings and high turnover rates. Sometimes lackluster performance can be turned around with strategic renovations and an engaged management team.
As you tour potential properties, keep in mind the goal is to force appreciation – increase net operating income. Identifying simple fixes that significantly boost value for tenants while controlling operating expenses is a proactive step every investor can make.
Look for opportunities like the ones below to develop a strategic plan for investing in multifamily properties for maximum profit.
Tip One: Updating the laundry facilities.
- Investing in adequate lighting, easy-care flooring and a fresh coat of paint may be all that is needed to renovate a shared laundry room.
- In-unit appliances or hook-ups may better serve your target demographic. Check apartment floorplans for large closets than can be easily converted to wash-and-dry centers. Don’t forget to negotiate rent-to-own pricing or discounts on outright purchases for tenants with local vendors.
- Cancel or renegotiate third-party laundry leases before you finalize property purchases. Some leases require as much as a 50-50 split between property owners and a professional laundry service. Eliminating the split can significantly reduce operating costs – and boost profit.
Tip Two: Add another layer of security.
- Install entrance security systems – such as key and intercom systems – that increase security in common areas and for individual homes.
- Update parking lot and breezeway lighting – eliminate dark spots for your renters. No one wants to fumble for the keyhole or walk from their car to their home in the shadows.
- Adding interior hallways adds value for many would-be tenants – this strategy will cost more initially, but you should be able to recover your investment with higher rent tiers.
Tip Three: Give your property a cosmetic make-over.
Installing new signs, interior blinds, and low-maintenance landscaping creates a stellar first impression. Remember, a dedicated management team keeps high-traffic areas spotless. Flooring material, furnishings and decorations must be easy to clean and maintain.
Tip Four: Realize major renovations present opportunities, too.
You don’t have to shy away from properties that need major renovations. A proactive strategy can help you capture higher returns on investment. Ask for closing credits to replace or repair parking lots, sidewalks, and other paved areas. You can also:
- Convert unused land into additional parking spaces or a community garden.
- Replace the aging roof with state-of-the-art solutions that increase energy efficiency and reduce operating costs.
- Install fencing or sound barrier landscaping to reduce road noise.
One of the most important elements of a proactive management strategy is getting to know your demographic. Study your prospective tenants – submarket renters come with diverse wish lists and must-haves. If you know what’s most important – wood floors, property-wide Wi-Fi, in-unit laundry facilities – you can look for ways to meet their needs.
Passive managers wait for the market to drive their property values. Proactive investors keep their eyes peeled for opportunities to increase net operating income, even before they sign the purchase papers.
Need some help assessing your property appreciation investment strategy? Appfolio.com property management specialists are here to help.
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AppFolio, Inc. develops Property Management Software that helps businesses improve their workflow so they save time and make more money. Appfolio submits articles & blogs including topics of Resident Retention, Improved Owner Communication, Time Management, and more.