How to Solve Common Apartment Issues—and Make a Profit

How to Solve Common Apartment Issues—and Make a Profit

1 min read
Matt Faircloth

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, N.J., is a developer and owner of commercial and residential property with a mission to “transform lives through real estate.” DeRosa creates partnerships to finance select real estate investments and has a proven track record of providing safe, profitable investment opportunities to their clients.

Experience
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 hundreds of units in residential and commercial assets throughout the East Coast. Under Matt’s leadership, DeRosa has completed tens of millions in real estate transactions involving private capital, including fix and flips, single family home rentals, mixed-use buildings, apartment buildings, and office buildings.

Matt is an active contributor to the BiggerPockets Blog and has been featured on the BiggerPockets Podcast three times (show #88, #203, and #289). He also regularly contributes to BiggerPockets’ Facebook Live sessions and teaches free educational webinars for the BiggerPockets Community.

Matt authored the Amazon Best Seller Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money. The book is a comprehensive roadmap for investors looking to inject more private capital into their real estate investing business and is a must-read for anyone looking to grow their business by using private lenders and equity investors. Kirkus, the No. 1 trade review publication for books, had this to say about Raising Private Capital: “In this impressively accessible introduction to a complex subject, Faircloth covers every aspect of private funding, presuming little knowledge on the part of the reader.”

Matt and his wife Liz live in New Hope, Penn., with their two children.

Education
Matt earned a B.S. in Industrial and Systems Engineering with a minor in Business from Virginia Tech. (Go, Hokies!)

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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.