27 Ways to Create More Value in Your Multifamily Properties
By Trevor T. Calton, MBA
President of Evergreen Capital
It's not all about rent income. Many residents will pay for extra services that will save time, money, and the planet.
Savvy investors look for ways to add value to their properties by delivering more value to their residents. Are you? If not, you could end up losing over time as expenses continue to climb, competition heats up, and vacancies increase.
Reevaluate Current Revenue Streams For Multifamily Properties
First, take a look at your existing revenue streams. Are you getting the most out of them?
Meet The Market
Conduct a rent survey or ask your broker for rent comps to see how your rents compare to your competitors. Deliver great value and charge fair market rent.
Reassess Fees & Deposits
When was the last time you compared your deposit & fee schedule to other properties? Do you know the actual costs associated with related items?
Add Amenities Renters Want
Don’t underestimate the value of time-saving appliances and creature comforts. Many renters won’t even consider renting an apartment without a dishwasher or washer and dryer in the unit. And most apartments have the space to accommodate an air conditioning unit. If space allows, the investment is well worth the extra potential rent. Even upgrading older appliances can increase the attractiveness of a property.
Some properties are still charging the same for laundry that I was paying back in college in the ‘90s. Laundry prices need to be enough to cover your cost of the equipment, maintenance, and utility usage. And some properties don’t have enough machines to cover the number of residents in the building. This will leave residents using another service such as a laundromat or cleaning delivery. If you don’t want to deal with managing your on-site laundry, consider outsourcing to a third-party.
Research New Revenue Streams For Multifamily Properties
Next, look at creating new sources of income.
The Ratio Utility Billing System (RUBS) is the pass-through of water and sewer charges to tenants. This is the most common new revenue stream for apartment properties. Sometimes called a ‘net lease’, it is now becoming the norm in multifamily housing. It incentivizes residents to conserve resources and take ownership of cost-saving measures.
People love their pets. Consider treating pets as tenants. Like their owners, they create ongoing wear and tear on a property. Consider charging an ongoing pet rent rather than charging a one-time pet deposit. With so many properties not allowing pets at all, most renters are willing to pay the extra rent.
How many of your tenants are paying for storage off-site? You might be surprised. If space allows, consider adding storage units on-site. Once in place, they need very little management.
Apartment development continues to trend toward higher density buildings. This trend has lead to a decrease in the average number of parking spaces per unit. Renters hate the inconvenience --and dangers--of on-street parking. And many of them are willing to pay a parking rent to secure a dedicated parking spot.
Bike Rack Rental
If you own property in a bike-friendly city, it’s quite possible you have tenants who commute by bike. Secure and covered bike storage could be quite valuable to those tenants. It saves them the storage space, and prevents muddy tire tracks on their (your) walls. Add in a bike-wash and maintenance area, and you may have tenants for life.
Furnished & Short-term Rentals
The market for furnished apartments may not be huge, but it will never go away. Consider charging a premium for furnished units. And of course, the growing trend of short-term rentals doesn’t look to be going away anytime soon.
Appliance Rental (Vacuums, Carpet Cleaners, Etc.)
It's shocking how many residents take advantage of this amenity. The benefit for you, of course, is that your residents are helping to clean and maintain the property.
Many properties with clubhouses offer them to residents for no charge. But quite often, tenants are willing to pay for their use.
Cell Tower/Antenna Lease
If you have a property in the right location, a cell tower lease can produce great passive income.
Great for urban or high-traffic properties, these are an easy source of passive income. They are often managed by third-parties.
Tanning Bed Rental
Would your residents drive to the nearest tanning salon if one were already on-site? Probably not, and the revenue per square foot might surprise you.
Install Vending Machines
Today’s vending machine technology is pretty impressive. With new features such as bank cards and automatic reordering, it’s only getting better. Save your residents a trip to the store, and they will pay a premium for convenience items.
A hot new trend in modern apartments is a dedicated concierge to cater to residents. Once limited to only luxury apartments, this is becoming more common every day. Imagine the value to your tenants--and how much they would pay--if they had someone to handle:
Pickup and delivery of postal and overnight services
Pet feeding while they’re away
Plant watering while they’re away
Hanging wall decorations
Taking out the garbage
Waiting for cable and internet installation or repair
Help with move in and move out
Reevaluate Current Expenses For Multifamily Properties
Next, take a look at your expenses.
Faster Turns = Lower Vacancy
This is a big one, and easy to quantify. How long do your units sit empty before they are ready for the next tenant? Multiply days vacant times lost rent. How much income do you lose? This amount adds up! Creating a system for turning units quickly can cut your vacancy expense down:
Set a protocol for exit walk-throughs with vacating tenants
Schedule vendors in advance and keep them accountable
Encourage new residents to move in early with pro-rated rent
Reduce Water and Sewer Usage
A major expense each month is water and sewer. Reduce water consumption by more than 30% by:
Installing low-flow or dual-flush toilets
Switch out to water-saving shower heads
Adding in low-flow sink aerators
Installing high efficiency dishwashers and washing machines
Also consider looking for water leaks as part of your routine maintenance. A small drip from a worn faucet washer can waste 20 gallons of water per day.
Simplify Your Landscaping
Install native plants that need less water, or remove plants altogether. Also, analyze your irrigation, timing, and usage. If your sprinklers turn on when it’s raining, it’s time to invest in a sensor.
Install A Recycling Center
A designated place for recycling can reduce garbage pickups by 50%. It also encourages residents to keep the property clean and green.
Common Area Lighting And Electricity
LED lighting has finally reached the point of affordability. LEDs consume a fraction of the power of traditional light bulbs, and they last for decades. Automate them with sensors or timers, and watch your electric bill drop. Also, consider installing solar panels to offset your electricity costs.
Have Your Property Taxes Reassessed
Concerned that your property taxes are too high? Contact a local real estate or tax attorney to find out if your property is a candidate for reassessment.
Have Your Insurance Re-Quoted
Have you taken steps to improve your property, such as installing a security system? You may have insurance discounts available to you.
Most residents pay for a cable or satellite bundle. Contact your local providers about what wholesale packages you can offer as an amenity. The cost you pass-through to your tenants should be less than what they pay. You will make a profit and your tenants save money. It’s a win-win for everyone.
Remember, most renters make decisions on a base-rent to base-rent comparison. Your marketing must broadcast what features and amenities are included. In higher-end luxury buildings, tenants are less price-sensitive and prefer amenities over discounts.