How to Solve Common Apartment Issues—and Make a Profit

by | BiggerPockets.com

Recently, I had a whirlwind day, walking through two apartment buildings and tons of units. One of the buildings my company and I own; the other building we are about to put under contract.

After walking these buildings, I want to share two super important lessons that I learned. These lessons will help you not only evaluate apartment buildings but also make them more energy efficient and profitable once you own them!

Related: How to Be a Landlord: Top 12 Tips for Success

Apartment Buildings: Common Issues & Solutions

I learned two lessons on this day:

  1. How to manage owner-paid utilities. I am not the biggest fan of owner-paid utilities; however, if managed correctly, you could create more energy-efficient buildings and even generate some additional cash flow. This is powerful if you can scale with multiple units in one building. Put limits on thermostats, improve insulation, and install faucets and shower heads designed to conserve water.
  2. How to increase below-market rent for current tenants. If you want to keep good tenants in-place but increase below-market rent to current rates, consider internal and external amenity improvements. We are going to offer residents a menu of possible upgrades. For instance, “For $75/month more, would you like new flooring? New kitchen cabinets?” We also plan to make exterior improvements to the property, like adding a playground.

In the video above, I go into more detail about the utility and rent issues I discovered during this walkthrough and effective solutions for dealing with each.

The moral of the story? The path to success in real estate involves identifying problems like these and coming up with creative ways to remedy them, taking into consideration both what you want and what is best for your tenants.

How would you overcome the issues I discovered during this walkthrough?

Comment below. 

About Author

Matt Faircloth

Matt Faircloth, Co-founder & President of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, is a developer and owner of commercial and residential property with a mission to “transform lives through real estate." Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to owning and managing over 370 units of residential and commercial assets throughout the east coast. DeRosa has completed over $30 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, office buildings, and tax lien investments. Matt Faircloth is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets’s Facebook Live sessions and educational webinars.

4 Comments

  1. Ronak Shah

    @Matt, I liked the idea of offering upgrade to the tenant which they will pay for while living there rather than having lot of deferred maintenance or under market unit at reduced tenant turnover either due to not upgraded facilities or forced termination.

    • Katie Rogers

      We should not conflate upgrades with maintenance. If the property needs new floors, then that should be on the landlord. If the floors are in good condition, then we can talk about upgrade. If the only purpose of the upgrade is to create a rationalization for pulling more rent out of tenants, then nevermind. And people wonder why landlords have a bad rep.

  2. Becky Zienkowicz

    These are great ideas and thank you for the video! I’m looking into some single-family rentals that already have long term tenants. I was trying to figure out how to do some minor upgrades and make the tenants more agreeable to the rent increase.

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