3 Affordable Ways to Add Value to Your Multifamily Property [Video!]

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There are a bunch of ways to add value to your multifamily deal, such as upgrading kitchens and baths, which will yield a higher rent from prospective tenants. You can also separate utilities to pass expenses onto the tenants. We have done both, but investments like this can be costly, even if they do have a high return.

What about ways to add value that are on the more affordable side? Watch the video to see what we did specifically to add real value at little cost.

Related: Swap ‘Til You Drop: Multifamily Tax Avoidance Tips from Closing Table to Inheritance

3 Affordable Ways to Add Value to Your Multifamily Property

1. Increase the profit of the property.

The first way to add real monetary value is to do something that increases the profit of the property. Increase rental revenue or decrease expenses—sounds like a simple way to add value, right? Well, it goes beyond that because although you are now enjoying more cash flow from your rental, you are also increasing its value through something called forced appreciation.

Here’s how it works: Multifamily properties are evaluated based on cap rates. A cap rate equals the net operating income (NOI) divided by the value of the property. If you increase rents or decrease expenses, even by a small margin, your net operating income will go up. If your property is evaluated at the same cap rate, the only thing that can happen is your value goes up. Let’s run through a quick example. Let’s say you add 4 storage units to your property and lease them for $30 each, or $120 per month, which is $1,440 per year. Storage units arguably don’t have any noticeable expenses, so that’s all profit. If your property is evaluated at a cap rate of 10%, your value goes up by $14,440! Not bad, and I can tell you that 4 storage units cost quite a bit less than that, so it’s a great investment.

2. Create a sense of security for your tenants.

The second way to add affordable value is to create a better sense of security for your tenants. If your tenants don’t feel safe where they live, they will move. It’s that simple. Creating a safe living environment can indirectly decrease your vacancy rate. If you make improvements to the property’s safety, make sure your tenants are aware of the upgrades. It will go a long way. Watch the video to see the affordable upgrade we implemented.

Related: How to Beat the Coming Housing Slowdown With a Value-Add Multifamily

3. Add affordable amenities.

The last way you can add some value is by putting in affordable amenities to your multifamily. There are big, expensive amenities you can add that work on large apartment complexes, such as pools and workout rooms. But remember, the point of an amenity is to make life easier on your tenants. It doesn’t matter how much it costs; it just matters that they use and appreciate it. In today’s video, you will see how we added an amenity and also created an additional revenue stream.

Be sure to watch the video to see the implementation of these different ways to add value! Do you have any other ideas on how to add value at a reasonable cost?

We are all ears—share them in the comment section! Thanks for watching and have a great and profitable week!

About Author

Matt Faircloth

In 2005, Matt founded The DeRosa Group along with his wife, Elizabeth. At the time, the two person company owned and managed two assets – a single family home and a duplex. Over the last nine years, they have grown the company to a 12 person team owning and managing over five million dollars in residential and commercial assets throughout the central NJ and Philadelphia area. One of DeRosa’s mantras is “to make money while making a difference.”

25 Comments

  1. Jovan Hardwick

    Great video Matt and as always lots of information and value. Question Matt, sine you have an apartment and storefront the building is more towards the commercial side than residential right? So you will use a cap rate instead of Gross Rent Multipliers for the 1-4 units.

  2. Tom Donnelly

    Thanks for posting Matt! For tenants that were already in the property while you were building the storage units, did you give them the option to increase their rent for access or let tell them that rents were increasing because of the new storage?

  3. Moshe H.

    Great video Matt, thanks! I was wondering, on my 4 unit there are separate natural gas lines and hot water heaters for each tenant, and no common ones. So to put in a “landlord” washer/dryer how could I provide hot water? Is there maybe some kind of small electric hot water tank I could use just dedicated for the washing machine? (There is common electric.)

    • Matt Faircloth

      Hey Moshe,
      Great question. On this building, there is one hot water heater and it’s on the landlord so no biggie to pull hot water off it. We added washer dryers in buildings like yours and put in a small electric powered hot water heater dedicated to the wash machine. We didn’t pay much either. It was a few years ago so I don’t remember the specifications, or I would send that to you also.
      Good luck!
      Matt

  4. Cindy Rack

    Thank you for a great video and the information. I do have a question. Most of my properties are single family and duplexes. I don’t think it’s beneficial to put coin operated washer and dryers in single family homes not because of the cost but because of the expectation of the tenant that it’s not coin operated. However, what do you think about putting them in duplexes?

    • Matt Faircloth

      Hey Cindy,
      I think the break point for a good return on investment is 4 units. You can try it in a duplex if you have owner paid hot water and electric but your ROI will be more than 2 years to get your investment back. I would ask the tenants if they would use it. You may be able to create happier tenants which will make them stay longer.
      Another option is to offer to install washer dryer hookups in their apartments if they agree to pay an additional $100 per month in rent. That hook up should cost you $1000 or so, which is less than a 1-year return.
      I hope that helps!
      Matt

  5. Paul Moore

    Nice job, Matt. Great ideas. I’m trying to figure out if it makes sense to try storage units at our new multifamily assets. Maybe try a few as a test market first. Or pre-lease them before we build them. What are your thoughts on that?

    • Matt Faircloth

      Hey Paul,
      We are looking at building them on a 49 unit site we have in Lancaster PA. I just asked the manager to send out a poll the the tenants. We ask them if they would use it, how big they would recommend the unit to be, and how much they would pay. Around half the population got back to us, it was great. They really helped us design the model with their feedback. I didn’t ask them to commit to it up front though.
      I think I am going on your podcast next week? Looking forward to it!
      Matt

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