Value add properties are specifically attractive to an investor who not only want to enjoy greater returns than just passive income yields, and want to be able to control the value of their own investments.
This can be for long term wealth building, as well as cashing out and creating larger short term gains through refinancing or re-selling assets after the improved performance has been seasoned.
Here are just seven of the ways multifamily investors can add value.
1. Raise the Rent
One of the easiest and most obvious ways to add value is to simply raise the rents. Many buildings are suffering and are available at discounts due to being leased under current market rents. The one caveat here is watching out for rent control regulations which may limit the ability to raise rents. Otherwise, tenants can be renewed at higher rates.
2. Maximize Occupancy
Despite the strong economy over the past few years, many apartment buildings have been suffering low occupancy rates. This is often due to the recent boom in new players trying to take advantage of the property management industry, as well as out of area funds who haven’t invested the time to get to know the local renter pool and market. Too often they leave large numbers of units open to having low retention rates.
By diving in with the right pricing and application process and ensuring the marketing fits the best renters in the local tenant pool occupancy rates can often be lifted substantially in a short period of time.
3. Improve Rent Collection Performance
Renter performance is a big factor for value. Those who routinely pay a few days late can be a nuisance, but can also add more income. Though if not kept in check this can lead to big losses and high churn rates. Better rent collection processes can minimize this risk, and keep cash flow consistent. That may be an on-site manager. Or it could be accepting online rental payments or even cryptocurrency payments.
4. Add Units
Adding to the unit count is a great way to elevate both income and value. This can be done by reconfiguring units, reducing parking and adding new buildings, or even just adding pads for future buyers to construct new units.
5. Reduce Expenses
Once you’ve maximized the income, the other way to improve profitability is to reduce expenses — target utility wastage and property management costs
6. Improve Reputation & Online Reviews
Leasing performance and even perceived property value can be heavily reliant on online reviews today. Having a system and taking a proactive approach to boosting positive reviews and online reputations can help a lot.
7. Physical Improvements
It is important to be sure there is a positive return on improvements made. Though everything from better signage, to major items which will make it more appealing to a new buyer like roofs and appliances and AC, can add value.
ABOUT THE AUTHOR
Bill Zahller is the President of Park Capital Properties and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Properties in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalProperties.com for more information.