Ways to Add Value to Apartment Buildings
Apartment buildings are in high demand among commercial real estate all across the country. Owning and investing in apartment buildings can generate significant income. There are many ways to increase the value of an apartment complex so that it will be an even bigger asset. Read on to discover ways to potentially increase the value of an apartment building.
How Multi-family Properties are Valued
1-4 Unit Properties: Smaller multi-family properties are valued on a comparative sales approach. So if a 3 bed and 2 bath home with similar features and in a similar condition in the same neighborhood recently sold for a certain amount of money, your property is deemed to be worth the same or very close to the same amount. Comparable sales or “comps” are widely used to determine property value on smaller residential properties.
5 or More Unit Properties: Larger multi-family properties are valued by the amount of income they produce. To find the value of this type of property you calculate the net operating income (NOI) and divide it by the capitalization rate for the area the property is in.
The NOI of a property is all of the income the property is taking in minus every expense paid out to keep the property running in great shape. The capitalization rate is the rate of return the market has determined is fair/acceptable to gain capital for the type of property.
Therefore, if larger multi-family units are valued higher with every dollar you decrease your expenses of owning or increase the income, it is in an apartment owner’s best interest to look for ways to do so to add value to their property.
Creative Ways to Add Value to Apartment Buildings
Sub-Meter Utilities
Not every tenant is going to be energy conscience, especially if they only pay a fixed rate for utilities. If the mechanics of your property allow, sub-metering can be a very smart way to add value to a property.
Washers and Dryers
A huge benefit sought out by apartment tenants is a private washer and dryer. If you offer these in your units you can raise the rent from $40-$75 a month for a very low start-up investment fee.
LED Lighting
LED lighting in common areas is a great way to save energy and to extend the length between purchasing light bulbs. It all adds up to less cost to operate your property.
Carports or Garage Parking
Renters will pay a little higher rent to have a covered and protected parking space assigned just to them. In addition, some complexes have offered premium parking for an extra monthly fee right up front next to the lobby or elevator of a building. You will be surprised at the willingness of tenants to pay for premium parking.
Renovations and Updates
This one is probably pretty obvious. Of course, a tenant is going to expect rent to be higher in a building that is up to date/trendy/stylish and offers more modern perks and amenities. When you do these things not only will a higher rent be expected it can also generate an increased demand to want to live in the building.
Extra Storage Space
Many apartment dwellers would probably agree that living in an apartment leaves very little room for all belongings. It can be cumbersome to store a bike on a back deck or in a hallway for example. Offering extra storage space for a small monthly fee can bring in a good amount of extra income while being very helpful.
Re-Negotiate Service Costs
Just as important as how to bring in more money, is how to save money on the expense of running things while still offering a quality service. One of the easiest ways to cut down on the cost of operations is to re-negotiate the cost of services with your service providers. Some areas to negotiate pricing or shop around for a better price include snow removal in the winter, landscaping, dumpster fees, cable (if you offer cable in your rent package), pool maintenance, etc. Saving small amounts on each of these services adds up quickly.
Adding value to your apartment building will be highly beneficial when you go to refinance or sell the property.
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