Where are the Value Adds?

WHERE ARE THE VALUE ADDS?

Andrew Macallum - Principal Interest Multi Family Investments

Royal LePage Commercial - Sales Representative - www.principalinterest.ca

March 31, 2022

The most consistent requests I receive from prospective multi-unit purchasers include looking for an off-market, value add opportunity.? The diamond-in-the-rough, so to speak.

With the availability of low cost financing lasting just over a decade and desire for property as a safe investment fuelling great interest in multi-unit buildings, some investors may feel as though the inventory of properties where there is potential to increase or improve value has disappeared.? Or at least diminished.? This is not necessarily the case.

So where can value be added?? It’s in the details that are found with a keen eye.

EXTERIOR IMPROVEMENTS

Is the property well manicured, absent of refuse and with clean windows?? Is there evidence of graffiti, punctured window screens or broken fences and railings?? What about stray grocery carts or items in the garbage area that don’t seem to go anywhere???

Clear expectations for custodial staff, landscape companies and property managers to address issues can often take the living experience of tenants from one of complacency to one of pride.? If the first thing a potential quality tenant sees is a property that looks like no one cares, an owner can rest assured that a quality applicant may take their interest elsewhere.

INTERIOR IMPROVEMENTS

Are the mailboxes, emergency instructions, contact information different common use spaces easily identified?? Are entrance mats torn and dirty while walls are covered with smudges and marks from heavy use?? Are handrails chipped and lights not working?? Is the floor marked with spills, salt stains and dog hair?

The common areas in a multi-unit building are sometimes overlooked as spaces that have further impact on a resident.? For the small amount of time that a tenant may spend in a common hallway, stairway or laundry room, it might be easy to dismiss the experience that someone may have in it.? Regular cleaning and disinfecting certainly address bad smells and unsightly stains.? Consider including regular paint touch ups and wall wipe downs as part of regular maintenance.? To that end, regular cleaning of entrance mats and professionally designed door signs, mailbox labels and safety floor plans will provide assurance to market rent tenants that they are paying for a higher quality living experience.

ENERGY EFFICIENT IMPROVEMENTS

Are toilets old with ineffective flushing mechanisms and flappers?? Are taps leaking?? Are the units separately metered for utilities?? Do tenants keep their windows open during the winter?? Are the laundry facilities an asset or liability?

There are many initiatives being offered to multi-unit buildings of every size that can help with energy efficiency and net-zero initiatives.? Ensuring taps don’t leak and transitioning common area lighting from incandescent and fluorescent to LED are low hanging fruit.? Savvy owners will look at larger infrastructure items like boilers and hot water heaters where there can be a dramatic impact on the operating costs of an apartment building.? Although low-flush toilets use less water per flush - it’s worth considering the number of flushes that it might take to get the job done.? More importantly, ensuring toilet flappers properly seal after each flush and refill mechanisms are running smoothly will help to prevent surprising and unexpected water bills.