One thing I like most about apartment investing is that it gives any investor
the ability to have a solid cash flow via multiplied profits. Additionally, I
want to find a way to increase those returns and ultimately, increase the
overall value of the commercial property. How can I do that? Using the concept
of forced appreciation, investors can make low- to no- cost changes and
receive huge returns. Here are a few key ideas to maximize the value of your
multi family real estate investment.
Raising the Rents for your Apartment Tenants
Many apartments aren't being rented at market value. In fact, what you'll find
is that many apartment complexes (especially those managed by the owners
themselves) are rented for 10% – 20% below market value to attract and keep
tenant's long term. This is a great strategy and one that is easily executed
however, keep in mind that the leases must expire before you can raise rents.
So during the due diligence period having the lease expiration on there. For
apartment complexes, this period can be anywhere from monthly to annually.
Decreasing Operating Expenses at your Apartment Complex
Look for opportunities to decrease the operating expenses. By that, I don't
mean that you should be "cheap" and cut costs on maintenance and repairs that
need to be done to keep your apartment complex up to date. I also don't mean
that you should take on property manage responsibilities yourself. What I mean
is that there are improvements that should be made such as installing energy
efficient windows and lighting, and digital thermostats that save you money on
your utility bills. You can also find cheaper alternatives for marketing your
property; you can shop for lower insurance coverage. Decrease your operating
expenses, but don't be cheap about it, be smart about it.
Improving Tenancy Rates
While there is no one single trick to improve tenancy rates, every investor
still has to find ways to tackle this challenge. First, take a look at the
tenant base of your apartment building. This will give you a good idea of who
is attracted to renting in your apartment building. This rental information
will then help you strategize your advertising and marketing efforts to
attract qualified tenants that are looking for the living experience your
apartment complex offers. I would also consider going beyond traditional print
advertising methods and include social media marketing.
Changing the Tenant Base in your Multi Family Investment
Some apartment buildings have tenants who aren't the best for your complex.
These tenants often include those who make late payments, no payments, have
been evicted multiple times and those who are involved in criminal activities.
These kinds of tenants not only affect your NOI, they also won't help you
attract tenants who are the exact opposite. Start to get rid of these kinds of
tenants and focus on doing what it takes to attract your target tenant
profile. This may mean that you'll have to invest in repairs and upgrades, but
in the long run, it'll pay off big time.
Upgrading your Multi Family Investment
Contrary to popular belief, upgrading your apartment complex does not always
include having major renovation work done. While there is often, cost
involved, the financial impact can be minimal compared to the returns you'll
receive. Some low-cost upgrades could be replacing property signage, upgrading
the landscaping, and repaving the parking lot.
Adding the Extras
There are other opportunities that will not only add convenience for your
tenants, but it will improve your NOI. These amenities include things like
vending machines for items like videos, soft drinks, and laundry products. You
might also consider adding larger scale opportunities such as laundry
facilities, parking, and storage facilities. These added amenities will make
your apartment building more attractive to potential renters and help retain
current renters longer.
Forced appreciation is a powerful strategy any investor can use to gain
multiplied returns on their apartment complex investment. Among their options,
investors can do simple things such as raise revenues, decrease operating
expenses, upgrade the building, and add convenience items for sale to your
tenants. These changes are relatively easy to make and often have low or no
cost. Like any real estate investment, each commercial property is unique and
I recommend that you research your options thoroughly to determine which
changes suit your property the best.