7 Upgrades That Can Add Value to Your Multifamily Property
How Investors Can Compete with High-End Properties
Property owners with older multifamily units sometimes struggle to compete with newer, high-end builds, but that doesn't mean that these types of units don't have investment potential. With the right add-ons, they can provide a real return on investment.
The key is finding the right mix of upgrades that don't have extreme overhead costs but can still substantially improve the property. Investors and experts cite several upgrades that tend to perform better than others; here are a few of them.
1. Make Improvements Inside the Units
For many investors, the interior is the first place to start.
According to a 2017 survey by the National Multifamily Housing Council (NMHC) and Kingsley Associates, renters have "must-have" features they expect in their units.
Results included upgraded appliance options, such as in-unit washers and dryers, as well as dishwashers. Air conditioning was also crucial, along with reliable and fast high-speed internet access and consistent cell phone reception.
"Today's multifamily properties must consider 24/7 year-round millennial schedules, family situations, cultures, and constant need for WiFi internet access," says Baron Christopher Hanson, owner of Baron Christopher Development, LLC, a multifamily development firm based in Charleston, S.C.
2. Upgrade Common Areas
One approach for investors is to look at where the property can accommodate common areas. If that conjures up ideas of dorm room living, think again. A recent study from IWG found that 70% of people globally work remotely at least one day a week. Those numbers will likely rise, so the idea of having reliable workspace is increasingly appealing to today's renters.
"Residents continue to put an emphasis on collaborative work and study, so adding spaces that are deemed flexible or can be easily manipulated is bound to capture and retain interest and increase ROI," says Jim Kirby, executive vice president of Acquisitions at GMH Capital Partners, a Newton Square, Penn.-based investment, development, and construction firm.
One option is to use flexible walls that can either open or divide up the space quickly and easily. If there isn't space for these sorts of common areas in the property, consider ways to provide workspaces inside individual units.
3. Improve Curb Appeal
The look of the property can help attract tenants—or drive them away. The good news is these sorts of exterior improvements often don't have outsized costs.
One approach many investors take is to focus on improving landscaping and green spaces. If a property has lawn space, upgrade it. Fencing, lighting, grilling space, and durable furniture can give tenants desirable green space, especially in more urban areas.
Some investors offer space to tenants to join in a community garden, which is a great way to improve green space and provide a community-building activity.
With limited green space, use the available area wisely. For example, potted planters strategically placed around the property can have an outsized positive impact.
4. Introduce Sustainability Practices
While the exact ROI on these practices is still somewhat difficult to quantify compared to others, sustainability matters to many renters. For older multifamily properties that weren't designed to the energy-efficient standards required today, it still pays to make improvements.
Start with energy-efficient appliances, then replace old bulbs with longer-lasting LED types, and offer bike storage. From there, more extensive and costlier upgrades can include improving insulation and upgrading to more energy-efficient windows.
For renters who pay their own utilities, environmentally-conscious efforts that also help reduce utility bills can go a long way.
5. Embrace Technology
Technology plays a role in the lives of everyone today, so including these features will attract prospective tenants.
Noticeable upgrades include app-enabled heating and air conditioning. Some investors are providing extra smart home features in-unit, including voice-enabled personal assistants.
Keyless and FOB entry are also options to consider. These features offer upgraded technology and enhanced security features, which are important to many tenants.
"Perhaps the most overlooked multifamily value to add is an over-the-top package, postal, and local delivery and shipping center amenities, ideally with locker rooms or delivery to your door," notes Hanson.
Touch screen or coded lockers can store and protect packages until tenants can access them. In the NMHC survey, 57% of respondents were very or highly interested in package lockers.
6. Be Pet-Friendly
Investors can choose to mitigate some of the risks of renting to pet owners by requiring non-refundable pet deposits, cleaning fees, or by adding a "pet rent" on top of monthly payments.
The NMHC survey found that 68% of households surveyed were pet owners, and that 33% of them cited pet policies as a deciding factor in where they chose to live. These renters also often had a higher retention rate because they were happy with their pet-friendly units.
Holly McQueen, vice president at GMH Capital Partners, also highlights a few ways some investors can go above and beyond in attracting tenants by embracing their four-legged friends.
"Items like wash and grooming stations and obstacle course parks that allow pets to exercise will continue to be sought after," says McQueen.
7. Offer High-End Amenities
For Rand Ginsburg, senior vice president of Asset Services at GMH Capital Partners, amenities that offer convenience go a long way.
"Amenities to consider include dry cleaning lockers, which allow residents to drop off and pick up their items without the hassle, and valet trash, which simply requires residents to put their trash bins outside of their door for emptying."
These types of amenities are increasingly standard offerings at high-end properties, but investors can incorporate them in smaller and older buildings as well. They have the added benefit of being amenities that tenants enjoy but still feel like a deal compared to rent prices on higher-end units.
Choosing the right areas to add value can have a significant impact when it comes to increasing the potential of a property—both in terms of market appreciation and rental income. The key is to find the right mix that will attract tenants and provide a solid return on investment.