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Top 5 Ways to Increase the Value of Your Apartment Building

by Ted Karsch on November 25, 2008 · 8 comments

  

  1. Raise the rents. This is definitely the most obvious solution if you are look at different ways to raise the value of your apartment building investment. Before you decide to raise rents do a survey of comparable rents at comparable properties in your general location. Then try to figure out what the average rents are for your specific type of property in your specific location. This can be more tricky than it sounds and is more of an art then a science. Ask yourself if your rents are below or above the “market rents” for your area. If you find that you are charging below market rents then it is advisable to bring your rents up to keep up with current market conditions.
  2. Install energy efficient lighting. If you pay for the electric in common areas it is always a good idea to install energy efficient lighting. Not only will this save you a lot of money in the long run but you will also be helping the environment.
  3. Reduce tenant turnover. Every commercial real estate investor knows that when a tenant leaves and you have to replace him or her that it costs money. Apartment building tenant turnovers can really eat into your bottom line if you are a commercial real estate investor. There are a multitude of methods to use that will effectively reduce tenant turnovers. Some of them include: keeping the rents at market, maintaining the grounds nicely, responding to maintenance requests promptly and sponsoring quarterly parties or activities. In short, if you keep your tenants happy and the apartment building maintained nicely then you will reduce your tenant turnover.
  4. Renovate the apartments. Renovating and improving the apartments with new appliances, paint, lighting/bath fixtures will allow you charge more rent for the same square footage. What this means is that you have effectively increased your net cash flow without increasing your fixed costs such as taxes and insurance.
  5. Cost segregation analysis. While we don’t have the time or space to discuss the intricacies of cost segregation analysis, it is basically a method of accounting that allows you to depreciate your building and expenses at a faster rate and save you a lot of money. Consult a qualified cost segregation analyst or CPA.

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{ 7 comments… read them below or add one }

Peter November 25, 2008 at 4:55 pm

Just be sure that you use quality paints when you are rennovating your apartment

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Joshua Dorkin November 25, 2008 at 6:05 pm

Low quality paint will definitely end up costing you more in the long run. Good call.

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Charlotte January 30, 2009 at 11:17 am

For a real estate agent these are great tips. Thanks alot

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Mark February 8, 2009 at 10:13 am

An ENERGY STAR audit for mulit-unit buildings is another great way to increase the value of your property and it will also save you money on utilities year after year. Check the ENERGY STAR website for a list of commercial service partners to find one in your area.

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John Walker June 6, 2009 at 7:27 am

It always helps a residential real estate agent like myself to keep up on the happenings of property management. I liked this article about apartment management and how to avoid vacancies and increase value.

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Donald G. Arsenault, CCIM, RECS September 28, 2009 at 8:27 am

I belive that reducing expenses is one of the best way to increase Net Operating Income. Reducing expenses affects the bottom line dollar for dollar so you get the biggest bang for your investment. One of the best ways to decrease expenses is to find a way to bill back expenses to the tenants. I have replumbed my building and installed individual water meters. Now, each resident pays their pro-rata share of the water and sewer bill. Additionally, they also pay the garbage bill based on the size of their apartment unit. I also charge a $10/month meter reading/collection fee. These charges bring in over $2,000 per month. Even at a 10% cap rate, that has increased the value of my 31 unit building by $240,000.

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Jim Allen January 12, 2010 at 5:49 am

All Real Estate has 6 degrees of seperation. Rental properties and Business properties and Single Family Homes share the same Doctor.

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