Purchasing 100+ MultiFamily Apartment Building - Needs Renovation

25 Replies

So, here it is, I love SFR, I have A LOT of SFR, over the course of the last two years, have been dipping into the Multi-Family space and now graduating to 100+ units - still buying lots of SFR (I just cannot contain myself :) )

10 Reason(s) I love SFR:

  1. Higher Rents
  2. Less Turn-Over
  3. Can be more strategic with purchase location and type
  4. More of it available in the marketplace
  5. Like the idea of a single home, single transaction, single & quick exit plan 
  6. Financing Readily Available
  7. Management System and Controls in Place (internal function)
  8. Construction is streamlined with all standard products in ALL SFR units
  9. Tenant Responsible for Exterior & Utilities
  10. Simple, Simple, Simple and can be replicated easily/swiftly

As I have been trying my hand at Multi-Family, it is similar but not the same and many will argue you gain more efficiency with Multi-Family but, you equally gain more challenges:

  1. Larger Common Expenses: Cleaning, Exterior Maintenance, More Placement, Common Area Utility Cost
  2. Potentially higher turn-over (frequency of turnover)
  3. Same material buying power as lots of SFR (Construction side)
  4. In-Fighting amongst tenants (always a fun one)
  5. Larger Capital Exposure

Progressing into this next phase, after slowly moving from 2-unit, 4-unit, 8-unit, 12-unit, 21-Unit, 36-Unit, 40- Unit - now to 100+ Units, all had own challenges - but the goal has always been the same, take something that's old, undervalued, do an awesome renovation, raise rents and replace existing tenants with higher quality teantns willing to pay a small premium to live in an updated unit as opposed to your typical run of the mill apartment (existing tenants  have the option to upgrade to the new premium units or exit) -

My question for BP Community what amenities are important to you - adding the following, please feel free to contribute or comment:

  • USB Outlets in all rooms (including bathroom)
  • Tile Shower Surround
  • Hard Surface Counters
  • Stainless Steel Appliances
  • New Luxury Vinyl Tile Flooring
  • High-End Glossy European Style Kitchen Cabinets
  • Lake View (Unobstructed 270 degrees) 
  • Updated Elevator Cars 
  • Fancy Modern Lobby with Coffee Station and Dry Cleaner Kiosk (drop-off and pick-up)
  • New Kids playground
  • New Dedicated Dog Park (Real Dog Park)
  • SmartHome HUB (Powered by Amazon Alexa)
  • Electric Car Charging Station
  • Bike Station and In-Unit Bike Rack
  • Private and Secure Fenced in Parking
  • 8th Floor Rooftop Deck and Community Center featuring (Large Format TV's, Ping Pong, Billiards) - with Full Lake View
  • On-Site Coin Operated Laundry
  • .............

What would you be willing to a pay premium for?

  • Pool ? 
  • Clubhouse ?
  • Zen Park ? 
  • Dog/Cat Food Kick Plate integrated in kitchen cabinets

Open to all feedback and comments - this is a journey, courtesy of BP this journey is even more engaging - making the leap - lets see what happens :) 

Steven Gesis, Developer
440-374-8403

@Steven Gesis If the property doesn't already have a pool, don't put one in.  Tenants almost never use them, and they add enormously to your insurance expense.  They are a drowning hazard and can draw in kids from the neighborhood.  They also add to water expense.  Not worth it in my view.

Dog run is better.  Super-cheap to put up, negligible effect on insurance, dog-lovers love them.

Originally posted by @Jonathan Twombly :

@Steven Gesis If the property doesn't already have a pool, don't put one in.  Tenants almost never use them, and they add enormously to your insurance expense.  They are a drowning hazard and can draw in kids from the neighborhood.  They also add to water expense.  Not worth it in my view.

Dog run is better.  Super-cheap to put up, negligible effect on insurance, dog-lovers love them.

 Thanks for the feedback - this helps reinforce my thoughts with the pool area, we did tinker with this thought, I was coming up with a similar theory- also being in Cleveland, Ohio - our pool season is maximum 4-5 months, considering the proximity to the lake with this building, residents will have access to public beach nearby 

Steven Gesis, Developer
440-374-8403

Hi @Steven Gesis - When I rented a higher end place, I wanted:

-A view with outdoor space (patio, balcony, etc)

-Nice lobby and entrance - I could control the look of my home but not the common area so having this updated and clean meant a lot to me.

-Secure parking/garages - In particular, I wanted at least one garage stall.

-On-site (or even better - in unit) laundry

In short - As long as the unit was updated and clean, I could make it my own space and be happy. What was important to me were the areas that were out of my control.

Also at this complex we had a pool, clubhouse, and a dog park but I never used any of them. 

Originally posted by @Michael Forbes :

Hi @Steven Gesis - When I rented a higher end place, I wanted:

-A view with outdoor space (patio, balcony, etc)

Done - this has a balcony with lakeviews

-Nice lobby and entrance - I could control the look of my home but not the common area so having this updated and clean meant a lot to me.

Good point - plan on making the lobby and entrance super nice 

-Secure parking/garages - In particular, I wanted at least one garage stall.

No Garage at this property, but I am also considering the property next door it is 88 units needs lots of help - but has a 2 level garage - figured if I got both I can offer residents the option at either property to use the garage they are literally next door to one another

-On-site (or even better - in unit) laundry

Will not be able to do the in-unit luandry (in this case it was space and cost prohobitive - but this ammenity was high on our list, it will have to be a common laundry on-site

 Thanks for the feedback - how about the location was that critical to you, or did the ammenity and price point outweigh your location choice? 

Steven Gesis, Developer
440-374-8403

@Steven Gesis - The complex I lived in was right by an interstate and a mall which made it very convenient. I would have chosen a place that wasn't so convenient however if I could have had the amenities with a slight discount for the loss of the convenience. The living space was more important to me than the location. 

@Steven Gesis

I would recommend seeing what the area commences because every area is different so you want to do some market research to help see what amenities are worth your wild.  Some of the amenities you listed (new kids playground, lobby, lake view) can add some value to your complex so I would focus on those BUT try to ask professionals who know the area well.

Originally posted by @Michael Forbes :

@Steven Gesis - The complex I lived in was right by an interstate and a mall which made it very convenient. I would have chosen a place that wasn't so convenient however if I could have had the amenities with a slight discount for the loss of the convenience. The living space was more important to me than the location. 

 Awesome feedback... thank you! These new units totally decked out with the amenities I defined are literally a stone's throw from highway access  (2 - Bedroom units will be $895 and 1 bedroom - $785) - we have some studios and jr. suites available also

Steven Gesis, Developer
440-374-8403
Originally posted by @Steve Kontos :

@Steven Gesis

I would recommend seeing what the area commences because every area is different so you want to do some market research to help see what amenities are worth your wild.  Some of the amenities you listed (new kids playground, lobby, lake view) can add some value to your complex so I would focus on those BUT try to ask professionals who know the area well.

 Steve, thanks for the feedback, I am one that likes to go against the grain, I am not discounting area, but I believe if you make a nice unit available in any area, does not really matter where it is or location, you will capture a 100-200 people that want to live in a nicer setting for not much more than the average rent rate in the area - I think all areas should have some minimal access to nice living regardless of area - 

Steven Gesis, Developer
440-374-8403

@Steven Gesis

I'm an RE investor in MO but a renter in CA. I've lived in a variety of rentals in CA I also renovate properties, so I'm always interested in the amenities/trims to include. One thing I will always put into future renovations is dishwashers. I also won't go for grantite countertops, but something in stone I will do, maybe quartz. Ikea has awesome countertops in stone and non-stone. In unit laundry is best. Second is free laundry in a common area. I think one of the most important things is sound blocking walls in between floors and shared walls. Also lots of outlets. I don't think amenities mater, I've lived in places with them and I didn't use them. Pools, hot tubs, gyms, saunas, I would not spring for those. 

Interesting discussion! 

Originally posted by @Lee Ripma :

@Steven Gesis

I'm an RE investor in MO but a renter in CA. I've lived in a variety of rentals in CA I also renovate properties, so I'm always interested in the amenities/trims to include. One thing I will always put into future renovations is dishwashers. I also won't go for grantite countertops, but something in stone I will do, maybe quartz. Ikea has awesome countertops in stone and non-stone. In unit laundry is best. Second is free laundry in a common area. I think one of the most important things is sound blocking walls in between floors and shared walls. Also lots of outlets. I don't think amenities mater, I've lived in places with them and I didn't use them. Pools, hot tubs, gyms, saunas, I would not spring for those. 

Interesting discussion! 

 Lee, good feedback

Yes, I think outlets, but USB outlets is a good one -

I can but the idea that the large amenities like pools, hot tubs etc are limited usage by residents

I think a hard surface top maybe not granite is awesome - I really like the porcelain tops out in the market, I will look into Ikea (great suggestion) - did not know they had hard surface tops

Would love to the in-unit laundry just could not swing it here

This building has concrete slabs between floors so I think Im good here - not sure about soundproofing between walls here, I was in a unit and did not hear the neighbors - 

This building will have new stainless steel dishwashers

Steven Gesis, Developer
440-374-8403

@Steven Gesis

USB outlets are cool and probably not much more expensive than a regular outlet, so go for it. I don't think anyone is expecting that nor will it sell the unit that much. I think you want to have things that "pop" when tenants walk in. To me this is nice flooring, nice clean walls, nice modern ceiling fans, nice countertops, lots of counterspace, gas stove, lots of storage, nice closets, in unit laundry (best) or free laundry (second best), nice bathroom with tile and storage. The more I think about it the more I think you really have 2 minutes to make the impression, wow, it would be so awesome to live here. You want to catch them in their emotional decision making state. I think that the amenities like pool, sauna, gym, shared working space, actually serve that purpose. I actually moved into a "luxury" apartment for all those reasons. I never used any of the amenities and moved out because the soundproofing was so bad. How many units is the one you are talking about? Ikea can be awesome for bathrooms and kitchens if you don't have wholesale modern stuff available to you. 

Have you thought about smart locks on all doors? If you rekey locks for every new tenant for a 100  unit property, that can get very expensive. With smart locks, you just have to click a button and the tenant's ekey is revoked. A resident also does not need a person to physically let them into their apartment if locked out saving your staff time and providing a better experience for the resident. Homebase.ai does a good job with this handoff process for locks in large multi-family properties and enables smart home move-in ready apartments if you ever decide to outfit the units with smart devices.

Originally posted by @Lee Ripma :

@Steven Gesis

USB outlets are cool and probably not much more expensive than a regular outlet, so go for it. I don't think anyone is expecting that nor will it sell the unit that much. I think you want to have things that "pop" when tenants walk in. To me this is nice flooring, nice clean walls, nice modern ceiling fans, nice countertops, lots of counterspace, gas stove, lots of storage, nice closets, in unit laundry (best) or free laundry (second best), nice bathroom with tile and storage. The more I think about it the more I think you really have 2 minutes to make the impression, wow, it would be so awesome to live here. You want to catch them in their emotional decision making state. I think that the amenities like pool, sauna, gym, shared working space, actually serve that purpose. I actually moved into a "luxury" apartment for all those reasons. I never used any of the amenities and moved out because the soundproofing was so bad. How many units is the one you are talking about? Ikea can be awesome for bathrooms and kitchens if you don't have wholesale modern stuff available to you. 

 122 units  - in this case  -  I agree with you it has to be a wow factor - 

Steven Gesis, Developer
440-374-8403
Originally posted by @Justin M Christian :

Have you thought about smart locks on all doors? If you rekey locks for every new tenant for a 100  unit property, that can get very expensive. With smart locks, you just have to click a button and the tenant's ekey is revoked. A resident also does not need a person to physically let them into their apartment if locked out saving your staff time and providing a better experience for the resident. Homebase.ai does a good job with this handoff process for locks in large multi-family properties and enables smart home move-in ready apartments if you ever decide to outfit the units with smart devices.

 Justin, great idea, I did not consider this, but I do have $250 per unit extra allocated for techy items, this may be that item 

Steven Gesis, Developer
440-374-8403

@Steven Gesis - I recommend updating every light bulb within the residents' apartments with LED(careful with the color temp- 2700 K is safe everywhere, you can go to 3000 K in kitchens if you want.) This will make residents' electric bills cheaper, and LED bulbs last for 20+ years, so it'll reduce your maintenance costs during turnovers. And the last thing you want is residents on chairs/ladders replacing bulbs. If you install large quantities of LEDs, make sure that the power factor of the bulbs is at least 0.90.

I'd also go with 1.75 gpm showerheads- decent ones can be $15-$25 apiece, that'll reduce ownership's water bills, and residents' water heating bills. I'd also recommend low water use toilets(there's one from Niagara called the Stealth that only uses .8 gpf) and Watersense faucets or aerators.

If you really want to go crazy, put in a solar array to reduce your common area electricity expenses- and put it somewhere visible. Allowing it to operate in 'island mode' in the event of power outages can really be amazing- your residents could have a place to charge phones/computers etc. in the event of an extended outage.

And if you have enough acreage, why not plant a few apple trees or other fruit trees that will flourish in your specific climate(Cleveland?) Or give the residents a gardening area with each one getting a certain plot for locally grown fruits and vegetables. This might be the latent hippie in me speaking.

If you do all these things, you'd be able to advertise your building(s) as water and energy efficient. The eco-friendly set may pay a premium for these things- and low electricity costs keep all residents happy.

I wont live in a unit without laundry.   Deal breaker for me.   I dont see how it could be an "A" class unit without in suite laundry.

Next would be high speed internet access.   So cable or GigaSpeed.   Many building only have direct TV...deal breaker

Next would be a garage, especially in Cleveland so I dont have to clean the snow off my car.   I lived in Pennsylvania with on street parking for 2 years.    No way I am going back to that.

These are all things you use every day or every couple of days.   Things like clubhouses are used once or twice a year.

Originally posted by @Michael Gansberg :

@Steven Gesis - I recommend updating every light bulb within the residents' apartments with LED(careful with the color temp- 2700 K is safe everywhere, you can go to 3000 K in kitchens if you want.) This will make residents' electric bills cheaper, and LED bulbs last for 20+ years, so it'll reduce your maintenance costs during turnovers. And the last thing you want is residents on chairs/ladders replacing bulbs. If you install large quantities of LEDs, make sure that the power factor of the bulbs is at least 0.90.

I'd also go with 1.75 gpm showerheads- decent ones can be $15-$25 apiece, that'll reduce ownership's water bills, and residents' water heating bills. I'd also recommend low water use toilets(there's one from Niagara called the Stealth that only uses .8 gpf) and Watersense faucets or aerators.

If you really want to go crazy, put in a solar array to reduce your common area electricity expenses- and put it somewhere visible. Allowing it to operate in 'island mode' in the event of power outages can really be amazing- your residents could have a place to charge phones/computers etc. in the event of an extended outage.

And if you have enough acreage, why not plant a few apple trees or other fruit trees that will flourish in your specific climate(Cleveland?) Or give the residents a gardening area with each one getting a certain plot for locally grown fruits and vegetables. This might be the latent hippie in me speaking.

If you do all these things, you'd be able to advertise your building(s) as water and energy efficient. The eco-friendly set may pay a premium for these things- and low electricity costs keep all residents happy.

 Always upgrade to ALL LED everywhere :) - usually last and final touch

Always add water sense fixtures everywhere, especially on a building like this where water and sewer are primarily on me

I am considering wind turbines due to proximity of lake and the nice lake breeze figured I can capture more energy this way and I think it will be less than solar

I like your thinking about the ECO-Friendly premium, did not consider this.

Steven Gesis, Developer
440-374-8403
Originally posted by @John Nachtigall :

I wont live in a unit without laundry.   Deal breaker for me.   I dont see how it could be an "A" class unit without in suite laundry.

Next would be high speed internet access.   So cable or GigaSpeed.   Many building only have direct TV...deal breaker

Next would be a garage, especially in Cleveland so I dont have to clean the snow off my car.   I lived in Pennsylvania with on street parking for 2 years.    No way I am going back to that.

These are all things you use every day or every couple of days.   Things like clubhouses are used once or twice a year.

This is not a CLASS A building, it will have amenity like a Class A would expect - yes, no laundry in -unit opportunity on this one

We do have high-speed access here no issue

Snow is not that bad :) - Remote start and you good to go!

Steven Gesis, Developer
440-374-8403

On the hippie / green amenities,   thoughts on EV charging stations  (I've been driving EVs since before you could easily buy them):

If your property is in a relatively blue-ish midsize to larger USA municipality odds are pretty good that there are getting to be a fairly large quantity of EV's on the road.   Many EV's  are initially leased instead of purchased,  and returned in exchange for the improved model after that initial 2 year term.   Since EVs are improving rapidly  (most 2018+ models will have around 200 miles range;  double a couple years ago)  that depresses the prices on perfectly good lease returns quite a bit.    Net effect is in many markets you can buy a 2-3 year old nissan leaf for less than half its original MSRP,   and older models can be found waaay under $10K.    This puts them well into play for people who don't have huge incomes.   

In order for an EV to be convenient,   there needs to be at-home charging available.   It doesn't have to be all that powerful since once at home most people sleep 8 hours and that is more than enough to recharge from empty a 2011-2017 leaf.    The capacity of one 30A dryer circuit can support two "Level 2" 15A EV charging stations which can give about 80 miles of range with an overnight charge.

Who would be most likely to buy an EV?   Obviously those who are "eco conscious" are more likely,   but probably an urban or suburban 2 car household with access to dedicated parking.    The EV gets used as the commuter and around town vehicle,   the other one gets used backup and longer trips.   If your area has car sharing programs or a lot of transit options,  you might find a few single car households going that route too.

EVs are getting much more common,  but they are still a fairly small overall percentage of vehicles on the road.    Depending on your area they may still consist of less than 1% of vehicles on the road,  up to at most 5% in some coastal areas.  

So if you have a property with enough units such that odds are pretty good a few residents might want to go EV,  and you have a few reservable parking spaces with electricity access,  thats probably a good place to start.     Wiring things up for a charging station at every parking spot is still overkill.   However if you find yourself digging up or rebuilding parking anyway,   running conduit to every 1/4 or 1/3 of the parking spaces might be wise, as would putting in some extra electrical capacity if you are building new or updating electrical service.   

As for cost,  the simple approach would be to include the price of electricity in the monthly parking space reservation.   You can estimate the cost of the electricity from your local rate and likely mileage driven.   Basic charging equipment is fairly inexpensive these days,   the biggest risk is vandalism of the plug and cord,  if the charging stations are someplace visible to the public.     European style public charging stations have totally removeable cords and drivers carry their own,  but the US didn't go that way unfortunately.

Some cities are starting to mandate EV charging readiness for parking facilities.   If your area has those rules,  look into them for guidance. 

Originally posted by @Brian Hughes :

On the hippie / green amenities,   thoughts on EV charging stations  (I've been driving EVs since before you could easily buy them):

If your property is in a relatively blue-ish midsize to larger USA municipality odds are pretty good that there are getting to be a fairly large quantity of EV's on the road.   Many EV's  are initially leased instead of purchased,  and returned in exchange for the improved model after that initial 2 year term.   Since EVs are improving rapidly  (most 2018+ models will have around 200 miles range;  double a couple years ago)  that depresses the prices on perfectly good lease returns quite a bit.    Net effect is in many markets you can buy a 2-3 year old nissan leaf for less than half its original MSRP,   and older models can be found waaay under $10K.    This puts them well into play for people who don't have huge incomes.   

In order for an EV to be convenient,   there needs to be at-home charging available.   It doesn't have to be all that powerful since once at home most people sleep 8 hours and that is more than enough to recharge from empty a 2011-2017 leaf.    The capacity of one 30A dryer circuit can support two "Level 2" 15A EV charging stations which can give about 80 miles of range with an overnight charge.

Who would be most likely to buy an EV?   Obviously those who are "eco conscious" are more likely,   but probably an urban or suburban 2 car household with access to dedicated parking.    The EV gets used as the commuter and around town vehicle,   the other one gets used backup and longer trips.   If your area has car sharing programs or a lot of transit options,  you might find a few single car households going that route too.

EVs are getting much more common,  but they are still a fairly small overall percentage of vehicles on the road.    Depending on your area they may still consist of less than 1% of vehicles on the road,  up to at most 5% in some coastal areas.  

So if you have a property with enough units such that odds are pretty good a few residents might want to go EV,  and you have a few reservable parking spaces with electricity access,  thats probably a good place to start.     Wiring things up for a charging station at every parking spot is still overkill.   However if you find yourself digging up or rebuilding parking anyway,   running conduit to every 1/4 or 1/3 of the parking spaces might be wise, as would putting in some extra electrical capacity if you are building new or updating electrical service.   

As for cost,  the simple approach would be to include the price of electricity in the monthly parking space reservation.   You can estimate the cost of the electricity from your local rate and likely mileage driven.   Basic charging equipment is fairly inexpensive these days,   the biggest risk is vandalism of the plug and cord,  if the charging stations are someplace visible to the public.     European style public charging stations have totally removeable cords and drivers carry their own,  but the US didn't go that way unfortunately.

Some cities are starting to mandate EV charging readiness for parking facilities.   If your area has those rules,  look into them for guidance. 

 Brian-

Thanks for the feedback, we have an EV dedicated station (1) for now, I suppose you are right, perhaps that it is to narrow minded, we will consider several more slips per your feedback. EV is a very small market segment, but it exists, so we should consider being a more considerate adopter.

We do not have any municipal requirements for this in our area, that I am personally familiar with. 

Thanks

Steven Gesis, Developer
440-374-8403

I think you need to specify what class of building it is. A Class C property, where cash flow is probably best, will not allow for most of the amenities mentioned. For a nicer property, sure. And like someone else said, you need to make sure you are plugged in to your local market to understand what it can support, and what the local residents expect.

Keep an eye on that one station and see how much it is used.   It might be worth advertising it as an amenity as well.    And yes,   the higher class / property and location the higher likelyhood of EV uptake.   I'm certainly curious about actual experience with this.

My properties are solidly class C in location and quality,   and my tenants generally aren't too interested in getting EVs themselves,   though most of them have gotten demo rides and stuck their noses under the hood of my car at one point or another.


My 4-plex is well suited to EV charging upgrades - it has under building parking,  and the main breaker panels are in the ground floor laundry room meaning running cables out to the front wall for charging stations would be trivial.   I'm just waiting for an excuse basically.   

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