Here are the top five things you can do to increase the value of your apartments or multi-family. So one of the great things about apartments and multifamily is that the value is not based on the comps like in residential properties, when an appraiser compares two or more similar properties and the price at which they sold to determine the value. Multifamily and commercial properties value is based on income and how much income the property is generating multiplied by the market capitalization rate or cap rate. So the great thing about that is the things that you do that directly impact that NOI – net operating income increases or decreases the value of your property.
Depending on the property and the condition you could do several things. The number one thing that almost everybody does, that is pretty common, is raise the rents. You just raise the rent, it automatically increases the income. On the flip side, though, by raising the rent. Sometimes if you raise them above market rents, you could be pushing out good tenants. So then you’ve lost income. So there’s a risk versus reward. Those are things we have to keep in mind when we’re actually doing this. And that’s where our experience and market knowledge comes into play.
A second thing that is very common to do is a lot of properties like to allow pets, but they’re not charging for those pets. There’s an added expense when you have pets on your property. There’s a cleanup on the grounds and there’s a maintenance side of it in the units. These are added expenses. You’ll want to have poop stations and things of that nature. So charging pet rent and larger pet deposits is definitely a must. And in doing so, it can actually generate more income as well.
A third thing that could be done is charging for extra amenities. Some properties have hookups for washer, dryers but they don’t have actual units in them. So if the residents wanted to come and lease equipment from you, they can just pay an additional fee and rent the equipment from you. Sometimes properties will have community areas like clubhouses, laundry rooms or bbq areas and things like that. Putting vending machines in that area that sell drinks and candy and such is another possibility for increasing the income or renting out those spaces to nonresidents.
A fourth thing is when older properties have the utilities master metered and not separated out but it just comes as one bill to the owner and then that owner just pays the whole bill. You could bill those utilities back to the tenant through the RUB system and increase the income by reducing the expenses the owner pays. Oftentimes those tenants or residents are completely unaware of their bill. So what happens is then they just use as much water and electricity as they want. And there’s no opposite accountability effect. And so in putting that back on them, it allows them to start thinking about their individual usage and bill.
A fifth thing you could do is to put recycling stations on your properties. The reason that is because by putting recycling stations where cardboard and such can be recycled, that’s less going into the trash, which means less times being dumped, which then reduces the amount of money you’re paying every month as an expense on your garbage fees. The reason that helps is because if your income say is at a hundred thousand, and then you have $90,000 in expenses then you only have $10,000 in NOI – net operating income, but if you have a hundred thousand of income, don’t change the income, but you drop your expenses from $90,000 to say down to $50,000, well now you have $130,000 of net operating income, NOI. And that difference of $40,000, in a market cap rate of 6% means the property value would be increased by $666,667 in value. Pretty crazy improvement huh!
One of the best things about working with American Made Home Solutions is the experience that we bring. There’s a lot of value in that. So much value that lenders will not fund people on their deals if they don’t have an experienced team member, either on the GP side or running the property and the asset management piece. American Made Home Solutions has over 25 years of asset management experience, property rentals and property renovations, we’re happy to take a look at any deals that you currently have or ones that you’re wanting to do and bring our experience to the table and see if we can help you find ways to do that and implement them as well. Click here to get an appointment to see how we can help you increase your multifamily property’s value.
