In apartments, the options on ways to increase the value of the property are only limited by the owner’s creativity. In this article, I will list just some of the endless ways to add value. I’ll start off with some of the more “conventional” ideas and work my way down to ones you have possibly never thought of.
Fill Vacant Units
Pretty obvious right? Get your vacancies filled up as quickly as possible and make sure you have an idea of what the current market rents are. Which leads us to our next subject.
If your rental rates are below market value configure a multiple step plan to start increasing current tenants to market. Some tenants will complain about the increase. When they calm down, they will realize the deal they’ve had the past few years and that renting another apartment will cost them as much as what you are going to charge them.
Although this one is conventional, I thought I’d list it anyway. By renovating the interiors, common areas, or curb appeal you can increase demand, which will allow you to push rent rates up.
If you are a long-term investor, LED lighting in common areas is a no-brainer. First, it uses so little energy, you save on the bill. Second, the bulbs last up to 25 years, so you aren’t paying maintenance to change them. Saves money plus you only must change them 4x in your lifetime, if you’re lucky. What’s there to think about?
People can and do pay more to park their cars or have additional storage in a garage. Adding an additional charge for garages is common and can be worth building garages. A cheaper but effective substitute would be carports. This will add more income to your bottom line, and the value of your property will go up.
We have all driven past that apartment building in the middle of winter where the tenant has the windows wide open, heat blasting. We also all know the tenant who never reports that their toilet is constantly running because they don’t pay for water. Depending on the mechanics of the property, sub-metering can be one of the largest value-add activities. Is sub-metering not possible? Then there’s RUBS: What is RUBS you ask? In other words, implement the Ratio Utility Billing System, under which landlords bill a back portion of utility bills — water, sewer, electric, and garbage — to the tenant.
If you’re allowing pets and not charging for them, you’re missing out. I have seen pet rent as high as an additional $150 a month. Add that into the rental agreement and let’s move on.
In larger complexes, owners can sign exclusives with cable providers and receive a small kickback from when residents sign up for the service. Call all your local cable providers to get the best bang for your buck.
Washers and Dryers
The number one amenity currently added to rental leases are washers and dryers. This could add $50-75 per month to your income.
Yep, the income produced from a vending machine can increase the value of your property. There are several settings in which you can place a vending machine, whether it be in a common area, gym or near a pool. You could do a snack vending machine or one with simple household essentials that people would rather run to their common area then to go all the way to the store. The best part is, the company will come place the machine and you don’t even have to pay for it, plus you get a percentage of the income.
As investors, we often focus on how to make more money. Just as important is how to spend less. In apartments, the operating expenses will include quite a few expense accounts. Landscaping, snow removal, cleaning, management, maintenance, dumpster fees, and many more items are all things you can look at for ways to decrease operating expenses. It could be as simple as calling around for quotes on grass cutting or calling the dumpster service and renegotiating the monthly fee.
If you have ever lived in an apartment you know there never a good place to put all those boxes of old books, or your bike in the winter. That’s why most people are willing to pay for pretty much an extra closet. If you have any extra unused space, for example an old laundry common area, create some storage closets and rent those from anywhere between $15-$50/month depending on the size! Creating a bike storage room is also another cheap and easy way to entice future tenants.
In today’s hot market, multifamily can be extremely competitive. Being able to implement these value-add strategies is great when it fits with your property. With creativity, you can not only add cash flow, but you can add great value to your multifamily.