Property improvements and upgrades can be expensive. And, it is easy to over-improve. I’ve been guilty of it several times. But, over the years, I’ve learned a few key practices and thought processes to maximize the return on your property upgrades and to help you select the improvements that will become a profit center and not just a cost. With that in mind, here are a few things to consider…
Know Your Market. A word of caution, before you start, you need to do your homework. The location of your property, the people working in the area, and the nearby amenities will all help determine what the right features should be for your property. You don’t want to waste your money on amenities that don’t add value to your tenant demographic or that won’t get used.
Not everyone wants or needs a dog walking area or a bike room. Survey your current residents for what upgrades they want – or, if you think you will be changing your tenant profile, determine your target demographic, and look to what the newer properties are offering to that market. You might be surprised at what features and amenities are priorities to your target market.
Go For a ‘Wow’ Feature. Make your property stand out. One of the first goals in adding value is to differentiate your property. Your goal is to create something at your property that the prospect wants, but that they can’t get anywhere else – at least not in your price range. This might mean, for example, creating a large, walk-in closet, complete with a high end closet organizing system versus the other properties that just have a standard closet. If you’re renovating your unit, think about how you can steal space for this. Most units these days are lacking in storage space.
It could be a unique common area amenity like a great BBQ or pool area. It could be unique services that you offer. Even doing a two color paint job vs. one color in the units can make a difference. Maybe your future residents get to choose from a palette of colors. Whatever it is, the key is to make your property stand out in the mind of the prospect.
If nothing else, I try to add a few features in the apartment that are ‘one step up’ from what the prospect might expect in comparable priced units. This might mean a nicer appliance, or electrical outlets with USB ports. The key is to be different and better in the mind of the prospect.
Think upgrades that have Operational Benefits. Think improvements like using LED lighting to save on energy bills, or adding a camera system that not only makes residents feel secure, but helps eliminate some of the problems you’ve had at your property. Perhaps upgrading the bath vent fans in the units to ones that are quieter and have stronger air flow. This not only make your tenants happier (to not have that noisy vent fan), but reduces the chance of mold developing. The list goes on and on.
Energy savings is a great area to look at. Smart lighting systems or thermostats not only save money and energy, but also have a ‘cool’ factor (pun intended). How nice would it be for your resident to be able to turn on their air conditioning 30 minutes before getting home. Or, with a smart lock, to be able to let in their guest, even when running late.
I once rented an office at a co-working space. The hallway lighting was motion activated, and monitored what times people tended to be in the offices and when they left. This helped keep the hours that the heat and air conditioning were on to a minimum, while still keeping us, as tenants, comfortable. You can do something similar at your property.
Think Amenities that Bring People Together. Renters today are looking for a sense of community. You want that too – encouraging connection amongst your residents keeps them happier and keeps them longer. That means less turnover for you and a building that becomes more in demand as residents encourage their friends to move to your property as well.
People spend so much time on technology these days, that they are looking for more human interaction in their community. Providing an amenity that aids in the meeting of fellow residents is the type of thing renters are looking for in their living experience.
You might have unused or underutilized outdoor space that could be converted into an area for social gatherings. Common cooking spaces, dog parks, community gardens, or rooftop decks and coffee bars are all places residents can gather to get to know each other. Creating great community amenities that encourage mingling and socializing is a great use of your renovation dollar.
When planning your renovations, always select your projects with intention. When it comes to attracting and keeping quality residents, the amenities and upgrades you choose make a big difference. Residents today are looking for amenities that provide convenience and a sense of community. Your goal is to meet those needs and do what you can to keep them longer. Remember, reducing turnover makes you money in the long run.
A word of caution – Always keep the base level of your competition and the reputation of the neighborhood in mind. People will only look in a certain price range in any given neighborhood. Above that, they go to the ‘next best’ neighborhood to look. I wish you great success in your next renovation.
Randolph is a Multifamily Investment Sales Broker with eXp Commercial servicing Multifamily Buyers and Sellers in the Greater Chicago Area.