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. Apartment properties are preferred by many investors as they bring in passive income (and its my favorite type of deals to do!). When buying apartments, it is normally a longer-term investment, but you need to make sure your money is used in the right place to maximize your cash flow.
Additionally, I want to find a way to increase those returns and ultimately, increase the overall value of my 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 apartment investment.
Maximize the Value of Your Aparment Investment
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. It will give you some idea of who is attracted to renting in your building. This information will then help you strategize your advertising to attract qualified tenants that are looking for the living experience you offer. I would also consider going beyond traditional print advertising methods and include avenues such as referral incentives and move-in specials.
Many apartments aren't being rented at market value. In fact, what you’ll find is that many apartments (especially those managed by the owners themselves) are rented for 10% – 20% below market value to attract and keep tenants 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. For apartments, this period can be anywhere from monthly to annually.
Upgrading the Facility
Contrary to popular belief, upgrading your facility does not always include having major work done. While there is often, cost involved, the financial impact can be minimal compared to the returns you’ll receive. I’ve already mentioned several options for upgrading your building, but other simple, low-cost changes could be replacing property signage, upgrading the landscaping, and repaving the parking lot.
Look for opportunities to decrease expenses. By that, I don’t mean that you should be “cheap” and cut costs on maintenance and repairs. I also don’t mean that you should take on property manage responsibilities. What I mean is that there are improvements that can be made such as installing energy efficient light, solar heating, and thermostats that ultimately save you money on your utility bills. You can also find cheaper alternatives for marketing your property, shop for lower insurance rates, and possibly even investigate if there are ways to save on taxes. Decrease your expenses, but don’t be cheap about it.
Changing the Tenant Base
Some apartment buildings have tenants who aren’t the best for your investment. These tenants often include those who make late payments, no payments, or those who are involved in criminal activities. These kinds of tenants not only affect your bottom line, 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.
Adding the Extras
There are other opportunities that will not only add convenience for your tenants, but it will improve your bottom line. These amenities include things like vending machines for items like snacks, soft drinks, and laundry products. You might also consider adding larger scale opportunities such as laundry facilities, parking, storage facilities, and even a gift shop or convenience store. These added amenities will make your building more attractive to potential renters and help retain current renters longer.
Power of Forced Appreciation
Forced appreciation is a powerful strategy any investor can use to gain multiplied returns on their apartment building investment. Among their options, investors can do simple things such as raise revenues, decrease expenses, upgrade the building, and add convenience items for sale. These changes are relatively easy to make and often have low or no cost. Like any real estate investment, each property is unique and I recommend that you research your options thoroughly to determine which changes suit your property the best.
Lastly, get know-how of the area & your tenants. Before you finalize on your plan, visit the area for a few days and at different times. This way one will get to know about the area and the crowd that lives there. Getting information from those who already live there will be a deciding factor your the forced appreciate plan.