5 Essentials to Successful Multifamily Value-Add Property Renovations

THE WESTMOUNT INSIDER Presents:

5 Essentials to Successful Multifamily Value-Add Property Renovations

Scott Ferguson, Sr. Director – Multifamily Acquisitions, shares five top value-add project areas that lend the biggest potential ROI for any potential multifamily investment property.

With such a great percentage of the current apartment stock being built before 1990, how do you transform older multifamily property buildings into the lucrative and desirable properties that investors and prospective tenants will chase after? While many of these properties have already undergone some amount of renovations, it’s determining the highest potential Return on Investment (ROI) from additional makeovers that will properly gauge the success of your next value-add investment.

While the idea of massive transformations and redesigns might be an initial train of thought, showing some restraint in your assessment might lead you to a more hospitable bottom line without sacrificing the integrity of your product. Taking this more disciplined approach will allow you to enable a more cost-effective solution and allow you to update designs with less complex yet more impressive transformations alongside a higher return for your cap-x investment.

In this month’s insider, we take a look into the top 5 value-add project areas that will upgrade and reposition your property to provide higher returns on your investment.

1.????Interior Renovations

With regard to interior upgrades, it’s all about what the market will support.?If the property has upgraded some units (a decent sample size) that is the best example of what can be achieved, but you can also look to rent comps for support. You’ll get the biggest bang for your buck with upgraded appliances such as dishwashers, stainless steel refrigerators, and microwaves, renovating cabinet faces, upgrading countertops, and even installing faux wood flooring in the common areas (this also saves on carpet replacement). Another upgrade with a strong return on cost is adding pet yards by extending the first-floor patios. This depends on available space at the site, but it can have an ROI of 30% to 40%.?

When looking at a MF investment opportunity, the first thing to assess is its age. If built prior to 1990 it may or may not have washer dryer connection. It is hard to achieve success by adding W/D connections to these older existing properties, it always costs more, sometimes much more, than you expect. However, most everything built after 1990 will have connections. For the last several years the adding washer dryer appliances has become more and more common, so if they are not already included, we generally look to add them.

2.????Upgraded Common Areas

Prioritizing common areas is essential both to prospective tenants and the overall site appeal. Ensure that the property’s pool has clean and attractive furnishings, and well-maintained and serviced landscaping. Additional areas such as shaded pergolas and outdoor kitchens or grill areas are bonuses for apartments located in geographical areas such as the sunbelt markets.

Upgrading and expanding fitness centers where feasible is an easy way to provide a true amenity to your residents. Fitness centers are a highly successful leasing tool, allowing your potential residents to feel like they can cancel the gym membership and workout at the property if their needs should change in the future.

3.????Improved Curb Appeal

People subconsciously equate cleanliness with quality. People will generally pay more for perceived quality. Often the simplest and least expensive way to add value is to just clean up what is already there. Put on a fresh coat of paint, trim the trees, mulch the flower beds, fix the cracked asphalt. If a property is perceived as declining in quality, it doesn’t matter what amenities they have available. Once cleaned up, make sure to budget to maintain it to remain as such in the future. It’s not the sexy answer, but it holds true.

Take advantage of simple solutions that address curb appeal opportunities. New or stained fencing, proper lighting throughout the property, and exterior landscaping upkeep are imperative for enticing new tenants. Updating the signage to rebrand the property ensures the community knows that these changes are indicative of the new owners and future trends.

4.????Technology Additions and Luxury Amenities

While business centers are going out of style as most everyone has a computer, market changes have increased the headcount in the work from home employee base. This lends the opportunity to add in Wi-Fi lounges and create workspace in the new world of “commuting” alongside the potential renovations and reutilization of these outdated community property space.

Keyless and FOB entries are often used as luxury upgrades that are geared more toward higher end properties. An additional thing that could be added as another luxury amenity items is installing app-enabled Nest thermostats. ?

5.????Pet-Friendly Options & Their Common Spaces

According to the latest Forbes Advisory survey, they found that an overwhelming majority of pet owners (78%) acquired pets during the pandemic. As you can imaging, accommodating renters with pet friendly units is an added perk to make available within your community. Additional common spaces for man’s best friend include pet or dog parks as a creative space for socializing and keeping pets healthy and active. Helping to reduce the pent-up energy for the day keeps these furry friends calmer in the attempt to reduce potential damage within their apartment units. Plus, dog parks are a quick and easy addition if the space allows. Pet wash stations are also a popular addition.

Want more insights delivered directly to your inbox? Join our mailing list: SUBSCRIBE HERE

Author: Scott Ferguson

Scott is the Sr. Director – Multifamily Acquisitions at Westmount Capital Realty, LLC. Scott oversees Westmount’s multifamily acquisitions efforts in Texas. He has over 20 years of experience with multifamily acquisitions, dispositions, and asset management. Before joining Westmount, Ferguson served as vice president of acquisitions and asset management at GFI Capital Resources Group, where he was responsible for the sourcing multifamily acquisitions throughout the sunbelt. Career to date, Scott has completed excess of $498 million of multifamily acquisitions.?

To learn more about Westmount Realty Capital or for additional information, contact us at [email protected] or find us at https://westmountrc.com/.

This article, and Westmount Realty Capital blogs in general, is intended for informational and educational purposes only, and does not constitute a solicitation or offer by Westmount Realty Capital, LLC to buy or sell any securities, futures, options, foreign exchange or other financial instrument or to provide any investment advice or service. Westmount is not your advisor or agent. Please consult your own experts for advice in these areas. Although Westmount provides information it believes to be accurate, Westmount makes no representations or warranties about the accuracy or completeness of the information contained on this article.