Do you think that achieving above average ROI in multifamily investing without stretching your budget is mission impossible today?

Dana on July 18, 2022

Do you think that achieving above average ROI in multifamily investing without stretching your budget is mission impossible today?

 

Improving ROI from apartment properties is more urgent now than ever before.

Value-add renovation projects can produce high ROI by allowing property owners to increase both rents and occupancy. Yet some owners are hesitant to move forward, due to financial concerns and monetary outlook uncertainty.

There is no need to put off the construction upgrades, but you do need to pay attention to how they are carried out as you want to get the best value for your invested capital.

How can you make sure that you are not leaving money on the table and receiving the highest returns in this environment?

 

Maximizing your returns

 

Building renovation initiatives must be carefully chosen now more than ever before. It’s important for multifamily owners and investors to make changes that represent the asset class of the property and are intended to boost rents and occupancy.

 

A workforce housing apartment complex won’t require luxury bathroom fixtures, although renovating is still recommended. To entice tenants, bathrooms must increasingly be updated to a basic standard that matches expected rents. For instance, new countertops can look modern, fresh and appealing even if they are not constructed of the most expensive materials.

 

When purchasing an existing structure, a thorough plan for rehabilitation should be included in the investment pro-forma. You might use the estimated cost of the remodeling to bargain down the purchase price while negotiating the deal.

 

Making an early investment may also enable you to reduce your continuing running expenses.

You can cut future operating costs, such as housekeeping fees and repair charges, by using low-maintenance or maintenance-free materials in common spaces. Additionally, communities that have neglected or put off maintenance or renovations are rife with opportunities. By providing routine upkeep at a greater level than the prior owner, the property will attract more prospective tenants.

 

What to do to get the highest ROI?

 

Curb appeal

 

The building’s façade leaves the first impression on potential tenants, so you should think about whether it will lure them in or push them to look elsewhere.

 

One underutilized update that can increase curb appeal is attractive signage, and well-designed siding can enhance the look while keeping the building simple to maintain.

 

Vinyl flooring and shutters that require no maintenance can also add textural components and are an investment that only needs to be made once.

 

Although installing new siding increases curb appeal and requires more expenditure, the owner should carefully assess the ROI it will provide in the long run.

 

Security

 

Make that the building’s front and back doors, as well as the windows and doors in each unit, lock securely. Installing new locks or doors is the least expensive and most effective way to provide tenants a sense of security.

 

If security isn’t a top priority or isn’t adequately in place, many prospective tenants will cross your building off their list while looking for a new apartment. If security is already subpar, this change can significantly increase ROI while requiring little more expenditure.

 

Installing security video surveillance and additional security systems will provide your tenants the extra touch of security will be one of the key differentiating factors when making a decision about which apartment to rent and whether to renew their lease or not.

 

Reliable roofing

 

With a sturdy roof and/or efficient gutters, you can protect your multifamily property from unnecessary damage and stress for your renters. Even though a new roof would need a substantial capital investment, investing in it early in the building’s ownership will save you a lot of money on repairs in the future.

 

Renters won’t likely be impressed with the new roof right away, but it will prevent future difficulties for both them and the property owner by preventing costly interior repairs.

 

Unit layout and key in-unit amenities

 

Apartments in older buildings typically have limited total square footage, but occasionally a layout alteration can make the units feel substantially larger. If you can open up the kitchen, think about opening up or demolishing a wall to create an open concept in a smaller space.

 

If your units are not already equipped with in-room washers and dryers, these are the key amenities that will boost the appeal and value of your units and accelerate your cash flow and ROI.

 

Kitchen and bathroom

 

The mistake that many building owners of worker and affordable housing make is over-improving the kitchens and toilets.

 

When other, less expensive materials can nevertheless provide a significantly superior experience for renters, this asset class simply does not call for marble or granite finishes.

 

Countertops, cabinets, appliances, and finishes that have recently been upgraded but are less expensive can go a long way toward luring new residents and increasing the value of the building.

 

Replace outdated brass finishes with brushed nickel finishes for a simple, low-cost remedy. Longer-term expenditures like better appliances and durable flooring will wow tenants and lower recurring maintenance costs.

 

Avoid the temptation to implement these recommendations only partially. Many owners renovate buildings one unit or area at a time in an effort to preserve immediate cash flow.

 

As a result, they do not benefit from volume materials pricing or from a moment in time when the marketplace recognizes that an apartment community has become something different, better—and worthy of higher rents.

 

While the cost may be higher to do it this way, an upfront capital spend will result in more impactful changes to tenant satisfaction and attraction—along with those lower maintenance costs that will start to pay off right away.

 

We will be dealing with uncertainty for a while over the direction of the economy and the real estate investment markets. It’s crucial to take action to increase ROI in existing properties while we navigate this period as an industry.

 

Even though the market may experience short-term challenges, there are innovative value-add solutions that can open up new possibilities for boosting income and ROI for real estate investors. The multifamily investors that will decide to make these smart moves today will enjoy the juicy benefits in the years to come.

 

Ready to start your next investment project?

Please contact us to learn how we can best help you to turn your next investment project into a success.

Email: [email protected]

Telephone: (954) 570-0300

Address: 850 SE 7th Street, Deerfield Beach FL 33441

 

About Adivo Construction

We are a national general contractor with over 50 years of combined construction expertise specializing in the value-add improvements of apartment communities.

Our mission is to assist our clients in finding the right balance between capital expenditure and appreciation potential by designing and executing customized renovation programs that are focused on increasing cash flow return and overall return on investment.

We have completed over 100 repositioning projects for publicly traded and privately held domestic and foreign companies in states such as Florida, Texas, Kentucky, Oklahoma, Georgia, South Carolina, Utah, North Carolina, Tennessee, Indiana, Michigan, Missouri, Arkansas, Ohio, Arizona, Nebraska, and Kansas.

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