Redesigning Your Rental Apartment for Higher Rent Yields
Traditionally, property owners and property managers almost never refurbished, renovated or redesigned their units. Was the cost really too much, or were they just too lazy?
The words renovation or redesign is all about the tenant it seems. So why should we spend so much money to do something for them? Could the rehab ROI ever be justified? Tenants and the government might not let us raise the rent anyway.
If rent controls are ruining the party for you, should you look for legal ways to raise the value of the property? (Perhaps it’s time to unload your rent controlled property?).
It could be this is the ideal way to increase property yields, improve property value, and to make tenants feel really special. High end features with a clean fresh layout makes tenants feel they’re in a luxury condo and it gives them more room. In a tight market on class A units, the upgrades can help. With class B units, you might only be more modest in the upgrades.
Renters Will Love It
In the unappreciated lives of renters, these upgrades are very attractive. And if you’re needing to sell the apartment/condo/house in the next few years, the renovations will likely generate a positive return.
Will it be expensive? Check out this $2k reno of an apartment kitchen. After you come to believe this is a worthy idea, you’ll start to see the full potential and that you can work within your budget.
What if your tenant is vacating the unit and you have an opportunity to renovate and charge a lot more rent for the next tenant? If you’re permitted to do this in your jurisdiction, the upgrade could draw better, higher income tenants, including babyboomers who have funds to rent a nice place.
Owners report that replacing carpeting with vinyl, tile, or wood flooring promises the greatest return on their investment, to say nothing of the fact that these surfaces are durable and easier to maintain. – from Multifamily Executive report
A Property in Demand is a Long Term Asset
A renovation might put your unit into a whole new level of rentability and rent revenue. For instance you could build in a highly desirable office space — a rare and treasured benefit for many renters who may run their own businesses or plan to.
As we said in the what do tenants want post, tenants will pay a surprising amount more for better accommodations. The stats prove it. Higher rent yields and property value along with better, easy to please tenants, who stay put makes for profitable property investment.
And rentals in New York, Boston, Philadelphia, and San Francisco can be of very limited square footage and suffer dysfunctional layouts. These aging tenement buildings and cramped conditions cry out for relief. Rethinking the layout, flow, color, light and functionality of these ancient units can turn them into inviting, more spacious homes.
To answer this need, there is a cottage industry of sorts composed of local designers that cater to low cost renovations and redesigns. Sometimes they’re hired just to fix the place quick and make it rentable. Other times, they might help you reconfigure a whole block of apartments into something really special.
Okay so by now, you’re warming up to the idea of a reno in your condos/apartments and the potential ROI. What specifically should you improve to achieve the best overall renovation results? Consider first the benefits renters want and then consider how much that would cost.
What Do Quality Tenants Wish For?
- large granite countertops
- modern style kitchen with new appliances
- new stackable modern energy efficient washer/dryer combo
- layouts that create more open continuous space and storage space
- new glass shower, soaker tub, and new toilet
- engineered wood flooring for living room and bedrooms
- eco-friendly lighting and plumbing
- new kitchen faucet
- extra space for pull out sofa or wall bed
- ceramic tile in the bathroom
- bigger, energy efficient windows
- heat deflecting blinds or shutters (plastic or wood)
Endless Possibilities to Improve Your Property Assets
There’s no end to the variety of renovations you might do in a 1, 2, or 3 bedroom apartment or condo. That’s why getting a free quote from a designer can help you visualize a new layout.
Hang in there and get a quote. Remember the benefits: higher rent, higher property value, appreciative tenants willing to stay put and pay more, fewer maintenance and repair costs, and less time waste. That all adds up to real dollars, over the 10 year life of the renovation.
If you’re still unsure of your rehab ROI math, check out this post on Multifamily Executive for a cautious view of the return.
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