When acquiring and repositioning a multifamily property, knowing how and where to spend your dollars in order to maximize returns can be crucial in setting the stage for a successful rebrand.
On the smaller class B and C end of the multifamily property spectrum, where communities regularly trade for $15 million and under, deciding where to spend can be even more difficult.
A recent NMHC/Kingsley Associates Renter Preferences Survey, which surveyed more than 250,000 renters at more than 4,000 properties, found that some of the most desired features and amenities of multifamily properties are soundproofing, secure parking and pool/fitness centers. Additional must-haves for tenants surveyed included reliable cell reception, high speed internet access and secure amenity access.
While it’s not always possible or cost effective to add a pool or fitness center to a class B or C property, some combination of the above features and amenities could be wise.
Research is Key
Make certain you know what your priorities are, and what investments and upgrades will yield the highest returns. To maximize your budget, you may want to consider embarking on exterior or interior cosmetic upgrades first.
“Sometimes, people put a lot of money into the exterior, on things like landscaping, painting and parking areas, but people spend more time in their apartment home,” Barbara Savona, CEO of Sprout Marketing told the NAA when asked about repositioning properties. “It’s a lot easier for people to get past an unattractive exterior than an unattractive apartment home, because they just walk in and out of the building. But their home is the most intimate place of their life. With that said, though, you might have to start with exterior changes to get noticed.”
Cosmetic changes can greatly increase the value of a property by increasing its appeal to both current and potential residents. Popular and cost-effective improvements in this realm include painting, improved signage, landscaping, resurfacing parking lots, updating interior and exterior finishes, and even changing the name of the complex.
Aesthetic changes can have a significant impact on both vacancy and rental rates.
Get With the Times
For older apartment product with outdated floor plans, sometimes structural and major renovations are necessary. Because this type of upgrade can be the most involved, it can also be the most expensive. However, it can also represent the highest return on investment.
These type of structural renovations might include altering floor plans, updating kitchens and bathrooms, replacing outdated flooring, and constructing or renovating common area amenities like clubhouses, pools and outdoor grilling areas.
While there are a number of variables that can impact rents, such as the age of the building, location and surrounding competition, property owners can expect renovation dollars to generate rent bumps anywhere from 10% to 30%.
“Renovating kitchens is still a big rent booster, Scott Wickman, regional vice president at Western National recently told NAA. “Apartment owners can fetch rent increases of up to $75 to $100 with basic kitchen improvements, such as countertops, paint and appliances.”
For many owners, installing wood, or wood-like flooring has been the most productive and cost-effective improvement, along with kitchen upgrades. Minor changes like improving an apartment’s lighting can also be very cost-effective.
Another in-unit upgrade that can be made for relatively little cost is smart- home technology.
Adding technology like smart thermostats, Bluetooth door locks and smart lighting costs about $500 per-unit, and can increase rent by $25 a month.
“One of our biggest focuses has been technology and smart-home features,” Eddie Reiner, director of asset management for Pensam Capital, told NAA. “These upgrades have been very helpful in aiding renewals and fighting back against the new communities coming online.”
Add “Soft Amenities”
For smaller Class B and C properties that can’t compete with the suite of amenities offered by larger Class A properties, consider adding “soft amenities,” which are services that can make a resident’s life easier but aren’t necessarily a tangible product.
Soft amenities can be very cost-effective, and can be as simple as partnering with a local business to offer residents dog-walking services, meal delivery options and even how-to courses on a variety of topics.
These value-add amenities are things that you will help facilitate, but not necessarily pay for.
As you can see, there are many ways that you can add value to reposition multifamily properties in a cost effective manner. We are happy to put our multifamily expertise to work for you!