Which multifamily property renovations will give you the most bang for your buck to increase rental income? That is a loaded question with no universally agreed-upon answer. There are many factors to consider including the property’s age, location, tenant profile, and rental comps.
There are several key improvements that have proven themselves to be safe bets, giving multifamily property owners a reliable means to upgrade their rental income. Westmount’s multifamily investment team focuses on three key renovation strategies when choosing which value-add projects to implement on our properties. These consistently generate the highest return on investment in our portfolio.
Improve Curb Appeal with Exterior Renovations
Improving and maintaining a property’s curb appeal creates a strong first impression for tenants, business partners, and potential investors. This is especially important for prospective residents because occupancy is a crucial metric for multifamily managers. Apartment communities often have hundreds of units and tour numerous potential tenants every day.
Upon acquiring a multifamily community, Westmount will roll out a rebranding package complete with a new community name, new logos, updated signage, and a fresh exterior paint job. Custom art and murals are also commissioned for special occasions and when budget permits.
Seasonal landscaping also breathes fresh air into the appearance of your community. Some typical landscaping items include pruning shrubs, replacing dead plants and flowers, trimming and pruning trees, and cleaning excess debris off the property grounds. Another benefit of proper landscaping is deterring unwanted pests.
Finally, Westmount will complete improvements to parking lots as needed by the community. These include projects such as resurfacing and repainting lines, repairing and/or installing covered parking, and sometimes expanding available parking by constructing a new lot.
Upgrade the “Wow” Factor with Unit Interior Enhancements
Ask any realtor and they will tell you, “Kitchens and bathrooms sell homes.” This is also true for the multifamily rental market. Renovated kitchens and bathrooms are an excellent way to increase rents because tenants spend a lot of time in these spaces. Unit interior upgrades are the staple to Westmount’s multifamily value-add strategy. We focus primarily on kitchens, bathrooms, and flooring.
Kitchen upgrades typically include granite/quarts countertops, new stainless-steel appliances, upgraded LED lighting and fixtures, custom backsplashes, and painted cabinets. Depending on the project and/or budget, these enhancements can be customized to accommodate existing upgrades or kitchen styles.
Bathroom upgrades follow a similar plan, replacing countertops, lighting, and fixtures to create a more modern look. Some properties require a full replacement of the bathroom flooring, shower tile, or sink. These projects require much more capital, but the potential added value is immense.
Finally, Westmount’s standard unit renovation package includes replacing old carpet/flooring with luxury vinyl plank flooring. A lighter shade of grey or brown is often chosen to enhance the brightness of the home. Luxury vinyl is easier to replace and creates a clean look at a price much less expensive than traditional wood flooring.
Ultimately the scope of any interior upgrade program is dictated by the condition of the existing units, cost/feasibility of the planned upgrades, and the willingness of residents (prospects) to pay a premium for the enhancements. A detailed review of upgrades at competing properties and their rental rates is a critical step in the evaluation process. Westmount is typically looking for a 20% return on investment in order to justify the investment in interior upgrades.
Create a Sense of Belonging with Community Amenity Upgrades
Community amenity upgrades can go a long way in creating a sense of belonging and improving the overall experience for residents. For example, upgrading furniture or adding features like shade structures or lounge chairs around the pool can create a more inviting space for residents to relax and socialize. Similarly, improving fencing or adding new landscaping to the pet park can make it a more enjoyable and safe space for pet owners and their furry companions. These upgrades can foster a sense of community among residents by providing shared spaces for social interaction and recreation.
Custom projects like Westmount at The District’s Community Center are an effective way to repurpose an open space and add additional amenities. This project turned an open plot of land between buildings into an open-air entertainment area with playgrounds, games, tables, chairs, and fitness machines.
Revitalizing the property’s clubroom or business center provides residents with an inviting space to gather and connect with each other. When renovating this space, Westmount often revisits the layout, replaces old furniture, upgrades the technology, and adds a coffee bar. These changes make the space more inviting and functional.
Community upgrades also increase the value and desirability of a property. They are excellent to show on tours as they make a property much more appealing to potential residents. Ultimately, investing in community amenity upgrades can be a win-win for both property owners and residents, helping to improve the quality of life of residents while improving the offerings for prospective residents. Creating attractive community spaces gives more opportunities for residents to engage with one another. Surveys have shown if you know 3 or more of your neighbors, you are more likely to renew your lease. By reducing turnover rates, you create additional value by lowering turnover costs.
Author: Tanner Tovy
Tanner is an Associate at Westmount Realty Capital, LLC. He works in the Dallas office with the multifamily group covering the West, Southeast, and Texas markets. He graduated from the University of Arkansas and completed his Master’s in Finance at Southern Methodist University.
To learn more about Westmount Realty Capital or for additional information, contact us at info@westmountrc.com or find us at https://westmountrc.com/.
This article, and Westmount Realty Capital blogs in general, is intended for informational and educational purposes only, and does not constitute a solicitation or offer by Westmount Realty Capital, LLC to buy or sell any securities, futures, options, foreign exchange or other financial instrument or to provide any investment advice or service. Westmount is not your advisor or agent. Please consult your own experts for advice in these areas. Although Westmount provides information it believes to be accurate, Westmount makes no representations or warranties about the accuracy or completeness of the information contained on this article.
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