When it comes to multi-family valuation, the most significant way to improve the property value is to change its net operating income. You can do this through increasing revenue, decreasing operating expenses, or ideally both. This blog will break down how you can add value to your tenants’ lives to increase the apartments rents.
To increase rent, we concentrate on the value of our doors to each tenant. With more real estate properties being transformed into multi-family properties every day, the tenants expectations have increased significantly over the years. With our focus on Class B housing, charging more rents in the current environment can be difficult. It’s important to survey the competing properties and see how sensitive price can be for the submarket. However, elevating the property to add security, comfort and functionality will retain and source new residents regardless of the submarket.
1. Stay Connected and Add Convenience
Today’s most well-known tenants are Millennials and Generation Z, who have grown up in a fast-paced world and expect to stay a part of that world. When it comes to appeasing these residents, they want luxuries that older generations may not have cared for, like access to high-speed internet. While everyone may not want to pay for high-speed internet, it will attract more people if available from the internet provider. The apartment should have ethernet port(s) to appreciate the fast speed, and if WIFI cannot extend to every room, the property should consider installing WIFI extenders throughout the property.
If you are willing to spend more money for higher rental revenue, and if the apartment layout allows for it, consider adding a washer and dryer set to the property units. We have seen on average additional rents of $35-$50 for the washer/dryer convenience in our markets. If you spend $800 on a washer dryer set and increase the rents by $35 each month, in 22 months the increased rents will ultimately pay for the washer and dryers. With a life expectancy of 10 years, that $800 will give you a return of $3,430 profit per unit over its lifetime.
2. Be Pet Friendly
68% of American households own a pet, but only 18% of rental properties allow small dogs, and 20% allow cats. To increase net operating income in apartments, you need to let man’s best friend into your properties. As more and more people are permanently working from home, they need someone to keep them company. If you design your property with pets in mind, you can increase rents to include an animal fee.
To build a property with animals in mind you need to think about what pet owners want for their dogs. Having a grass field for the dogs to play, complimentary doggie bags, and building a small dog park for the furry friends to run around in will increase your property’s value to dog owners.
With animals, damage to the units is possible. You can expect floors to be scratched and walls to be damaged, but with reasonable rental rates and nonrefundable pet security deposit, you can comfortably offset the acquired costs.
The last reason to allow furry friends in your doors is to attract longer term tenants. Because of the lack of options for tenants and their dogs, pet-friendly properties see an average stay of 2.5x longer compared to non-pet-friendly properties.
3. Promote sustainable practices
Today, companies are held to a higher standard because tenants are willing to support environmentally responsible companies. Here are some easy steps to be more environmentally conscious at your properties.
Using LED lights instead of conventional light bulbs uses less energy, decreases the electric bill and allows for different light options. With LED lightbulbs, you can set different atmospheres in other rooms with varying color bulbs. Another simple solution is to reduce waste on your property. Waste reduction can be accomplished with a recycling program or limiting water waste for your units. When you are renovating the water fixtures, consider converting to water-efficient fixtures. The most effective way to reduce water waste is installing low flow shower-heads and toilets. With LED lights and water efficient fixtures you also benefit from lower operating expenses increasing Net Operating Income.
If you complete the necessary upgrades, your property may qualify for the Fannie Mae’s Green Building Certificate, showing your tenants that your property is taking the steps required to reduce climate change. Your ideal tenant will appreciate the property’s effort by picking your property over the competitors in the area.
4. First Impressions are Everything
Would you want to live at a property that looks unsightly? Spend the time and money to make it appealing because the property is someone’s home. There are no excuses for old paint and unkempt landscaping. Consider adding property gates and security cameras to promote a safer environment. If you want to charge the highest rent possible, you need to make your property the best-kept property in the area. When you increase your property’s upkeep, the transformation will instantly improve the range you can charge for rent.
5. Promote Community at Your Property
Your property needs to center around a community environment where neighbors know each other. For this to happen, your property needs community space and host events. Installing charcoal grills around a pool or adding a playground are simple things that get people out of their homes and into a social setting. If you want to see extensive community involvement, the property needs to host events. Some practical events/giveaways that build community include holiday parties, donating school supplies, and providing turkeys for Thanksgiving to name a few.
The range you can charge for rent will directly relate to your willingness to make changes to your property and increase the property’s value to the tenants. To increase net operating income in apartments, you have to design your property to become a place where people want to live. This increases occupancy rates faster than just relying on someone needing an empty apartment. With that, your rents will increase, and your average tenant length will increase.