Why you need to focus on Value Add Properties!

My focus is on the distressed residential multi-family properties. The reason I do this is to first get a great deal on a property and second the pursuit of adding value to the property. The quality of tenants you can attract to rental property is dependent upon the cleanliness and appearance of the apartment, building and property. Keep in mind the cost of upgrading a building to make it attractive to renters when you purchase it. Good tenants reduce the inconvenience of collecting delinquent rent, minimize building maintenance, reduce repairs from intentional damage and reduce possible evictions.

Finding a great deal on a property requires knowledge of the location and what can you ask for rent once you bring the property to a better level of condition. An important aspect is to understand the deficiencies on a property, if you are already a contractor or an experienced DIY’er then you should have no issue spotting what is wrong with a property and how you can leverage that to get a lower price. If you are uncomfortable in performing this due diligence then please seek out an inspector/contractor that can provide a report that separates the building into individual units to make any problems found easily identifiable. I concentrate on exterior of the building, basement, common entries, lighting, the Landlord meter(s) and any unique features of the property. Note any tenant safety and possible liability concerns.

Adding value to a property can be done in many ways and I recommend creating a property improvement plan with phases that build upon each other. This is done to minimize “landlord burnout” and ensure you don’t get in over your head with improvements that result in an empty building. These are some of the things that I focus on when adding value to a property. There could be many more dependent on the property. Raising rent to current market, many property owners keep rents below market to retain tenants. Today’s renters frequently look for amenities or location over the lowest rent. Replacing utility equipment to ensure tenants are paying for the ever increasing costs of utilities. This can be as big as new heating equipment to the lighting fixtures with energy efficient bulbs. A phased approach here is beneficial because there can be high capital costs. Cosmetic improvements are important for retaining current tenants as well as rebranding the property. Not only can this show the current tenants that you are interested in making improvements, making a case for increases come lease renewal time, these updates make the property more appealing to potential tenants. These do not have to be full renovations – it can be as simple as:

Kitchens - Counter tops, Stainless steel sinks, New floors, Refinishing cabinets.
Bathrooms – New Floors, Sink and vanity, Tub surround, Wash or replace tiles.
Landscaping - Grass cut weekly, Mulch around bushes, Fertilize the lawn, Add Flowers, Trim bushes.

Simple fixes like this add up quickly and don’t require a huge capital outlay. These changes will lead to forced appreciation with your property, which is what we always look for in our deals.

Do you have additional ways to create value in your properties? I would love to hear others experiences in nationwide markets! (PS – In forth coming blogs, we will explore more of this in greater detail.