In today’s real estate market it can be rather difficult to stand out from the competition – especially in Southern California where the market is a very hyper-competitive one. Renters have plenty of options to choose from when it comes to finding a new place to call home and their needs and wants are much different than those of previous generations. As Gen-Z and Millennial begin to make up the majority of the rental market, property owners and managers may find themselves scrambling to find new ways to not only attract these renters, but ways to retain and possibly implement rent bumps down the road.
Of course there’s no magical recipe of comprehensive repairs/renovations that will guarantee which improvements will generate the best ROI. However, that’s not to say you can’t be smart about what factors you consider to determine a realistic rent amount, such as:
- Property location
- Age, condition, and current amenities
- Profile of tenants in the area
- Rental values of comparable, competing units
These factors can help establish a base rent amount, and serve as a starting point in identifying the best upgrades to generate ROI. The editors of Multifamily Executive magazine, a publication geared toward apartment building owners, looked at leading rental property renovations and improvements and found that “skilled and rational” rental property owners could expect between 10 to 30 percent return on renovation investments. It also found that top ROI generators were: Wood floors, kitchen upgrades, and improved interior lighting. We’ll discuss these renovations, along with other lesser known ideas to generate ROI.
Get rid of the old carpeting
Replacing carpeting with vinyl, tile, or wood flooring generate the greatest ROI, according to Greystar’s executive managing director of investments, Wes Fuller. In this day and age there’s no reason to have outdated carpeting that pills after a while, which contributes to the worn-down look. Not to mention that high-quality tile, faux-wood, or natural wood flooring are more durable and easier to maintain. According to the organization, it spends on average $6,500 per unit for interior upgrades that typically justify $150 per month rent increases.
Upgrade to a modern kitchen
Let’s face it, everyone loves a good looking kitchen. It has the power to make a positive or negative first impression and for many renters having an up-to-date kitchen is must have. Cabinets, counters, fixtures, and appliances should all be aesthetically modern and sturdy, and although such replacements may seem costly, they’re usually worthwhile when considered within a long-term context. Take All Property Management for example, they spend $5,000 per unit on upgrading kitchen appliances and yield an additional $50 per month in rent. That’s a 10 percent ROI, and a great foundation for future rent increases.
Improve interior lighting
Good interior lighting can really help make any apartment unit stand out, it has the power to create an atmosphere that attracts renters. Try to avoid using harsh fluorescents, aged incandescents, and dreary fixtures which can create a depressing environment. Instead, use energy-efficient bulbs that come in a variety of warm and inviting shades. They use 25 to 80 percent less energy, and they’re becoming increasing affordable at an average of $1 per bulb. Making the switch will not only save you on maintenance costs, but also help reduce your property’s electric bill.
Install a washer and dryer
Adding a stackable washer and dryer can be a great way to generate ROI. Obviously, recouping the initial investment takes time, but experts say the long-term benefits are worth it. Many report that installing stackable washer and dryers can lead to a justifiable $50 to $80 a month increase in rent. Do the math and decide what’s right for your property.
Landscaping, signage, and common areas
“If your buildings don’t have good curb appeal, people just drive by,” says Keith Knight, VP of capital improvements and national accounts. Improving your properties curb appeal by investing in quality landscaping, signage, and common areas can generate sufficient ROI by attracting new renters. It’s a great long-term investment that eventually pays for itself, and if you’re looking to rebrand the building, it’s a good place to start.
Ready to improve your multifamily property?
If you’re ready to get the ball rolling on some improvements to your multifamily property, we’d be happy to consult with you to determine the best strategies to take and provide you with a preliminary estimate. All of the options listed above are just a few examples of ways to add value to your multifamily property. Give us a call to chat more about how else we can help generate ROI for your multifamily community with our design and build strategies.