How Do You Add Value to a Multifamily Property?

Table of Contents

Investing in multifamily real estate can be highly profitable since it generates a consistent cash flow in the form of rent from your tenants. However, investors who own multifamily units that are older may struggle to compete against new constructions. It does not necessarily mean these older buildings are no longer good investments—it simply means that you have to add value to it in order to compete.

For investors who want to control the value of their own investments while enjoying an additional passive income, value-add properties may be more appealing. Adding value to a multifamily property is also a good strategy for long-term wealth building.

There are plenty of ways to add value to a multifamily investment property. You may upgrade certain areas such as the kitchens or baths. Here we will be discussing some of the best ways investors can add value to multifamily real estate.

Adding Value to a Multifamily Property

For your multifamily real estate investment to become successful it needs to be able to attract new tenants and also keep your existing ones. As much as possible, you don’t want people moving out as it disrupts your cash flow.

This is not as big of a problem for multifamily properties as it is for single-family units wherein the cash flow stops entirely when the tenants move out. With multifamily properties such as apartment complexes, there are multiple units to be occupied, so you can still get monthly rent from your tenants even if one or two units become vacant. Still, you want all your units to be occupied so you can get the most income.

With the right add-ons, investors can enjoy a significant return on investment. The key to adding value to multifamily properties is finding the best mix of upgrades that will give you the most benefit without requiring a huge financial investment. This requires the ability to identify value-add opportunities that will give you the edge over your competitors. [1]

When it comes to adding value, it is not just about producing more income, but also improving the quality of life for your tenants. Ideally, this would be done without too many expenses on your part. But if the value-add ends up giving you a high return on investment then we can consider it a success.

Make Physical Improvements

If you are going to make physical improvements on your multifamily property, you can go beyond the necessary repairs. Aesthetic improvements are very important because they appeal to prospective tenants. Roofs, appliances, air conditioning, etc.—these can all add value to your apartment complex. Therefore these are the physical changes that can potentially give you the best return on investment.

When in doubt, the interior is a fantastic place to start. Appliances such as washers, dryers, air conditioning units, and dishwashers are considered “must-have” features. If you can also guarantee consistent cell phone reception and high-speed internet access, it will also work in your favor. A lot of tenants look for these when assessing Class A multifamily properties. [1]

Raise the Rent

A simple way to add value to your multifamily property is to raise the rent. The only thing you need to do is keep an eye out for rent control regulations as these may limit your ability to raise rents. With that out of the way, you can renew tenants at higher rates by raising the rent accordingly. [2]

To add monetary value to your property, you need to increase its profit. This is why raising the rent is considered an easy way to do this. This is called forced appreciation. [3]

When it comes to value, another big factor is renter performance. With better rent collection, you can minimize the risk of big losses while keeping cash flow consistent. Improve your rent collection processes by adding online rental payments or hiring an on-site property manager.

Speaking of rent, some investors collect more income by adding units to their apartment complex. They repurpose units, reduce parking, or even add new buildings. If you are willing to invest in it, this is a great way to add value to your property while increasing income.

Maximize Occupancy

Some apartment buildings are suffering from low occupancy rates despite a strong economy. This is something you as an investor would want to avoid. As we mentioned earlier, having a few vacancies in your multifamily real estate property is not a big problem. It will reduce your cash flow, but it is not the end of the world as long as your other units are occupied.

Your goal is to maximize occupancy and have all your units fully occupied for as long as possible. This means you want to get familiar with the local renter pool. Take the time to really understand your local market and what these renters are looking for in an apartment. Don’t just let your apartment building have multiple units open at the same time. [2]

Investors need to dive in, understand proper pricing, and ensure that their investment property does not have low retention rates. By doing so, they can market the property to the right tenants who are most likely to live in the apartment building for a long time.

Upgrade Common Areas

Improving the common areas of your apartment complex would prove to be a good investment because more and more people are gravitating towards the idea of working from home. A significant portion of those who work in the office spend at least one day a week working remotely. Adding areas where people can reliably get their work done is a great investment approach. Upgrading common areas can help you increase ROI and maintain tenant interest. [1]

If there isn’t enough space for a common area, consider providing workspaces within individual units.

Improve Curb Appeal

Upgrading the interior and the common areas will improve the quality of life for most of your existing tenants, which may convince them to stay for longer periods of time. But if your apartment building has a low occupancy rate and is struggling to get more tenants, improving its curb appeal may be the best strategy.

A property’s appearance is crucial as it could either attract more tenants or push them away. The good news is that these exterior upgrades do not usually cost a lot. If your property has enough space, you can add fencing, lighting, decorations, grilling space, plants, durable furniture, etc. Improve landscaping and add green spaces. Upgrade the lawn space. Going for these exterior improvements is a good way to add value, especially if your property is in a more urban area. [1]

Even with limited green space, you may be surprised what a number of strategically-placed potted planters could do to improve the entire look of your place.

Offer High-End and Affordable Amenities

When it comes to high quality apartment complexes, it is all about amenities. All things considered, this is one of the most important factors for a lot of renters. Even simple amenities that make life easier for your renters may go a long way. Consider adding dry cleaning lockers or trash collection. [1]

With high-end properties, tenants may expect more amenities. If you have the budget for it, try investing in pools, workout rooms, or an indoor dog park. Remember that these recreational amenities are just a bonus. If you are on a tight budget, just focus on simple amenities that make day-to-day apartment life easier. [3]

Investing in amenities is one of the best ways to add value to your multifamily property.

Improve Reputation & Online Reviews

You have upgraded the interior, the exterior, and the amenities of your multifamily investment property. You have even raised the rent to add more value to it. Now it is time to get the word out there. People need to know that your apartment complex is new and improved. You can use various marketing strategies to achieve this goal—or alternatively, you can just try to improve your property’s reputation and online reviews.

These days, even the perceived property value is important. This heavily relies on online reviews from people who have lived in your apartment. This is why as an investor, you need to take a proactive approach when it comes to managing your reviews and making sure you have a positive image online and in real life. [2]

Your tenants would be more likely to promote your property and speak positively about it in their online reviews if you make them comfortable. Your apartment should be a place where they feel safe and secure. Make sure your tenants feel safe where they live. Creating a safe and comfortable environment will lead to better reviews and happier tenants.

Embrace Technology

Adding a tech package is one strategy that not a lot of investors think about when it comes to adding value to their multifamily real estate property. A high-tech apartment complex not only operates more smoothly, but also provides a one-of-a-kind experience for renters. Consider investing in keyless locks, touch screen lockers, smart thermostats, or even Amazon’s Alexa system. [4]

One thing is for sure: technology will keep on evolving and revolutionizing the real estate industry. Adapting to these changes now will help you stay afloat and may even give you the edge you need over your competition.

Work with BAM Capital for Multifamily Syndication

Multifamily real estate certainly has plenty of undeniable benefits from consistent cash flow to several tax advantages. But buying and managing this type of property involves a lot of hard work. Even adding value to a real estate property takes so much planning. Multifamily real estate requires a very hands-on approach.

Unfortunately, many investors do not have time to become a landlord. They do not want to deal with tenants or handle emergencies. Some investors are simply not interested in these additional responsibilities. This is where multifamily syndication comes in.

Multifamily syndication lets you enjoy all the benefits of owning real estate without the responsibilities typically associated with it. No need for a lot of direct involvement.

Multifamily syndication is a form of group investment wherein multiple investors purchase a single property by pooling their resources together. This can be done with any type of real estate, but multifamily syndication is the most popular because of the consistent cash flow.

In a syndication deal, a syndicator or sponsor puts the deal together, locates an investment property, handles the financing, and then looks for passive investors to participate in the deal. Investors will provide most of the capital needed to purchase the property in exchange for equity and monthly cash flow. This is a lot safer than purchasing a multifamily real estate property on your own. Syndication also allows investors to purchase real estate properties that are normally too expensive for a single investor. [5]

Once the property has been purchased, the sponsor takes charge of managing the property. This takes off a lot of weight from the investors’ shoulders. They don’t have to become the landlord or even worry about the property itself. The syndicator will take care of it.

Multifamily syndication is perfect for investors who want to enjoy a passive income without the hassle or the headaches of managing a property.

Work with BAM Capital for multifamily syndication. This Indianapolis-based syndicator uses a vertical integration model that mitigates risk for investors by creating forced appreciation. BAM Capital has a strong Midwest focus, prioritizing Class A multifamily properties in that area. [6]

BAM Capital will arrange the syndication deal so there is no need to purchase an asset on your own. They will also handle property management.

BAM Capital works with accredited investors and negotiates the purchasing and financing of high quality multifamily real estate properties on their behalf. In fact, BAM Capital currently has $700M AUM and 5,000 units. Schedule a call with BAM Capital and invest today.

 

BAM Multifamily Growth & Income Fund III

BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.

  • Consistent passive income
    Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.
  • Significant tax benefits
    A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.
  • Vertically integrated company
    In-house property management and construction allow for predictable cost reduction and value add.

The above link will take you to the free Investor Portal to view all current offerings. If you do not have an account already, please create one to view the information.

The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.