If you are an apartment owner or operator, your property management goals likely consist of: 1) how can I keep my units occupied and 2) what changes can I make that will lead to the best ROI? There are tons of resources available in the flurry of real estate investing “do’s and don’ts” stating that this amenity or that upgrade will lead to the BEST ROI. But, what it all boils down to is; how can you best adapt your community to your meet tenant’s needs? While there are some universally accepted upgrades that are likely to receive a warm reception (like a pool, fitness center, or in-unit laundry), there really is no perfect recipe for guaranteeing ROI for your renovations. Why? Well, because every community serves a different demographic and area and costs won’t always equal additional value. While a pool may be a home-run amenity in Phoenix, AZ where it is sunny more days than its not, an indoor fitness center may be more valuable to the tenant in Brooklyn looking to avoid time outdoors during winter. But, even though there isn’t always a guaranteed recipe for success, you can look at what is working for others…and hopefully become inspired.
A small apartment complex that we’re familiar with in a coastal San Diego town, Carlsbad, is slowing renovating units as tenants move out. While one tenant living in one of the older models (with carpet flooring and older cabinets) is paying $1800 for a one-bedroom, new neighbors in renovated units with vinyl flooring and updated fixtures are paying $2000. Are they having trouble renting out the newer units with a $200 rent bump? Definitely not. This may be due in part to the community’s ideal location, but also in part to the fact that today’s renters will pay more for features like hard flooring. Let’s dig a bit deeper…
Facts are Facts: What an Apartment Rental Survey Tells Us
Below is a list of items that apartment renters are most interested in. While some features may seem like “no-brainers,” others may give you insight into areas where there is room for the addition of practical upgrades. Each feature is listed from highest interest to lowest (at the bottom) with the respective amount renters would expect to pay for the added amenity. These 10 items ranked at the top out of 69 different features according to the National Multifamily Housing Council.
- High-speed internet access – $35
- Parking – $32
- Walk-In closet – $49
- Soundproof walls – $62
- Patio or balcony – $52
- Washer/dryer in-unit – $64
- Microwave – $21
- Refrigerator with ice dispenser – $31
- Garbage disposal – $17
- Pool- $46
Based on the data provided, we can see that there are certain things like parking and high-speed internet that residents are very interested in, but don’t necessarily expect the need to pay a ton more for. Conversely, there are other items like a pool or in-unit laundry that may not be what is most important to them, but they will certainly pay more for the added value and luxury.
ROI Case Studies
Based on an article by Multifamily Executive Magazine, there are some properties that have seen recent success with specific renovations. In one case, Gables Residential, located in Florida spends $2,300 on average per unit, but is able to increase rents by $75-100 post-renovation efforts. What amenities are they investing in? Most of their improvements are focused on the interior of the apartments, including: wood or wood-like flooring, then kitchen upgrades, and lastly other small upgrades like improving a unit’s lighting.
Another example involves property management company, Greystar, which invests $6500 on average per unit in order to see a $150 rent increase per month. Adding washers and dryers is faring well for property managers- some seeing rent bumps for $50-80 per month.
Other studies indicate that community amenities like a fitness center can mean 5% increases in monthly rents. If your residents have a gym that is only a hop, skip and jump away, they are more likely to get value out of the additional cost incurred (rather than paying for a gym membership). Some other amenities outside of the interior upgrades that can go a long way include outdoor space (from terraces and balconies to yards), and things that you don’t necessarily have control over like “a million dollar view.” But, you can absolutely frame renovation plans around amplifying views in the spaces allotted.
Up-and-Coming Amenities for the Millennial Renter
There are some amenities that are a bit newer to the scene, that don’t necessarily have statistics to support ROI growth. But, they are no less significant…especially if you find yourself in a young rental market like that of Southern California’s. Here are some of the items that made our list:
- Amenities for Man’s Best Friend: Yes, dog parks! Here at REIG Construction we are huge fans of adding a dog park to communities. Did you know that pet owners will spend $
60 billion on their pets this year. You
better believe that some of those costs can translate into rent bumps if you include dog-friendly spaces at your community. Of these upgrades, communities are including: full dog-parks, treats and accessories in the lobby, and even pet washing stations.
- Tech and Social-Focused Upgrades: There are certain amenities being introduced today that cater specifically to the younger, tech-friendly generation. With online shopping continually on the rise, apartments are now offering package lockers. With often smaller space to work with in units, millennial renters are also more interested in shared community spaces like: high-speed work space areas or cafes, community gardens, and outdoor eating areas for entertaining.
- Mobile Must: Life online and quick access to the internet is imperative for renters today. According to a survey, 53% of renters tested connectivity during their actual apartment tour.
- Luxury Hotel Appeal: If you are in a competitive metropolitan area, shoot for a community atmosphere that matches that of a luxury hotel, with aesthetics and convenience. On the list of items to consider: Outdoor theaters, rooftop deck areas for socializing, wine cellars, laundry services and more.
Amenities that Match Residents Lifestyles Mean ROI
When it comes down to it…your interest in serving your resident’s lifestyle interests coincides with that they would also pay more for. Do some digging, surveying, and assess what would make the most sense for your community. Who calls your community home? And what will keep them happier there, longer? Answering these questions will set you up for the most success in seeing ROI for your multifamily. Because our team of experts have worked extensively in the Southern California multifamily realm, we have seen which amenities yield the most generous ROI. Consult with one of our team members today to develop your game plan.