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For apartment owners, the way to increase rental income and gain a bigger return on investment is to improve the property.
March 01, 2007 -- One way to reduce vacancies and increase rentability of apartment units is to make them cleaner, brighter, fresher, more comfortable and homey than other apartments in town.
Sometimes these two objectives can be in conflict. For instance, an improvement designed to attract tenants may cost so much that the amount of necessary rent increase makes the units harder to rent.
The Factors In The Decision
Here are some ideas about the factors that come into the decision to make alterations, or remodel the apartment property:
• Take a hard look at the rent schedule to see what the vacancy situation is now, if there are any concessions or giveaways currently in effect in the building, and the prospects for renewals. The answers can provide some answers about the timing of renovations.
• Painting both exterior and interiors is a good and inexpensive way to make a property look instantly better. This usually yields an immediate and satisfactory return on the cash cost. Experts recommend the use of lot of white and soft colors. If you think about using wallpaper or wall coverings for a more formal effect, realize that they cost more initially, but may last longer than paint.
• If you replace carpets, drapes and appliances, the appearance of the unit is dramatically improved and the chance for rentability increases. These costs, however, cannot usually be recouped quickly by means of a higher rent charge.
• Adding some recreational facilities can be a way to attract tenants. At some properties, a jogging track might be provided at a fairly low cost. Other exercise equipment such as horizontal and parallel bars can be inexpensive. Providing saunas, indoor exercise rooms, aerobic exercise areas or swimming pool are expensive and may not be justified by either an increase in rentability or return on investment.
Take care if any kinds of exercise facilities are added, check with your liability insurance agent to determine the protection needed against litigation from injuries.
• Adding barbecue pits and picnic tables if space is available can inexpensively attract tenants.
• Remodeling a kitchen or bathroom is always expensive. If your kitchens and bathrooms are now very outdated, they may be costing you lost rentals. If the funds to do the remodeling must be borrowed, making the determination of the amount of increase in rent will take careful calculation. Try to recover at least the financing costs within the first term of the lease.
• Sometimes a washer and dryer rental company will totally refurbish the laundry room as part of the opportunity to install their coin-operated equipment. The owner of the property can make the property more attractive and rentable without any cash outlay at all.
• In some apartment properties, recreation rooms have been converted into a day-care center staffed by a licensed day-care operator. The room might be divided for use by both young children and elderly people. It becomes a source for additional income for the owner and a drawing item for working mothers and for workers who care for elderly parents. Again, check your liability insurance!
Always keep tabs on the condition of the property. Make repair and improvement decisions promptly. If conditions deteriorate, it can lead to costly projects later. Keep very alert to what the competition is doing and always try to stay competitive with them. |
