Which Improvements to do/don't do on Fourplex?

Question

Hello all,

I recently purchased my first rental property in the form of a four unit apartment building.  I've already made several improvements to the property including new gutters, french drainage system, some moderate plumbing work (shut off valve installation), repair and resealed asphalt parking area, and updated the units kitchen and bathroom I'm living in.

I'm considering installing insulation in the building via blown in cellulose/fiberglass, new windows for building, and new landscaping (currently there is none).  All the insulation and windows in the building are original.   Although theses things don't need to be fixed I believe it would greatly enhance the qualtiy of living for tenants. What are everyone's thoughts?

Brandon Turner · Answer

Hey Rick, Welcome to BP!

I love 4-plexes and other small multifamily properties.

I generally don't upgrade those things unless I need to match the competition or I want to hang on to that property for a long, long time and I have extra money to do it now vs. later. This is especially true for Windows - as it is a visible thing that the tenant sees. You may even be able to get your local utility company to pay for the majority of the cost with rebates and such. My local Utility company pays almost $150 per window.

Also - be sure to add a photo to your profile (so we can get to know you better!), and consider introducing yourself in the New Member Introduction forum!

Kenneth LaVoie · Answer

Here in Central Maine we have some great rebates going on so we immediately go "whole hog" on weatherization as soon as wel buy a building. Our philosophy is that if we can stop money from going OUT as quick as possible, it will build up faster and we can sooner afford upgrading where needed. Our usual targeted payback is 3-5 years for weatherization (We have two programs: 1 that gives us $600 in free air sealing if we buy a blower door test per unit up to 4 units and another that is for OVER 4 units only that gives $1,400 per unit/50% cost of weatherization whichever is less) -- with tenant paid heat (rare in central maine) I still do some weatherization IF it's really needed. The less the tenant pays for heat the more you can (eventually) charge for rent AND my experience is that you have a high turnover in expensive to heat apartments. Typical use here is 400-500 gallons of oil per unit by the way.

Randy F. · Answer

My feeling is that if we want to do good things for people, there can always be found a convenient rationalization to hang the improvement on!

Will a given improvement justify higher rents or act as a selling point in a weaker rental market? Will the increase pay for upgrade within period I plan to hold the property? Will
my concern for the well being of my tenants impress the hottie in unit B?

George Paiva · Answer

Rick L. who pays heat?  If tenants do then don't be in such a hurry. And yes check into the energy efficient windows.  If not rebates I think you can get them tax free at least I was able to.

No worries I am the same way in that I would want my rentals to be nice enough for me to live in but at end of day its still a business and sometimes I have to tell myself that.

For example last weekend while I was at HomeDepot they had a sale in sensor lighting for outdoor.  I ended up buying a few and installing them.  At first I gave myself a pat in the back then when I got home I asked myself I just spent money and half an afternoon for something that was already working ;)  Oh well.   It happens...LOL

Rick L. · Answer

It's hard not to fall in love with your first one...lol.  I was lovestruck at first.  But, i've learned make big $$$ very slowly over a period of time.  That way I can mull them over.

I agree with George Paiva windows are where the majority of the heat/cold is lost. They're all originall single pain almost 60 years old.  A HUGE improvement will be noticed when they're ultimately replaced.  But, I'm just sitting tight and concentrating on running a profit every month.

Aaron Ruiz · Answer

Nice points George!!
I am in the process of getting a 4-plex as well in which I will be living in one of the units. If everything goes according to schedule I will own the property by the end of this month.
But I find myself already falling in love with the property! Thanks for the tips and advice.
And good luck with your investment Rick.. You should follow up with how you are doing with it and any problems you may run into along the way.

George Paiva · Answer

I agree with Brandon, I would only do them if its needed to get better tenants or tenants in your area require it.

I understand you are living in one of the units you probably are falling in love too much with this property.  Remember this is just an investment and make sure you do a cost/benefit analysis for each major upgrade.

I would not be doing the insulation personally.  The windows? Yes if they are the old 1 pane wood sash.  Replacement windows can be had for $150 each and add aestectically as well as ease of use for tenants.

I'd rather spend the $$$ on the structure or main utility, ie Submetering Electrical, Heating, bringing up the plumbing.  Seems like you already did that.  Its great you are doing that to avoid issues down the road.

SO as tenants move on you may want to update kitchen and bath, paint and carpets like you have to your unit and command more rent. This is where you can spend the $$$.

Otherwise build up your cash reserve, remember to pay yourself a little as well.  Then go on to the next property.

Which Improvements to do/don't do on Fourplex?

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