When and to what extent do you improve your Multi-Family Units?
Curious about your approach and strategy. I have an 8 Unit apartment building in Los Feliz, Los Angeles, CA. One of my units is now vacant. I could slap on some new paint and make minor repairs to get same/similar rent as before, or could do moderate improvements to try and hit top of the market rents, but wondering what criteria/benchmarks you all use when considering more moderate/extensive improvements. How do you decide when to do repairs vs. improvements and how much $$ to spend on improvements? Other than the obvious - raising rents - what other factors do you consider? For example, do you find patch repairs to be more costly in the long run? Or, what increase in ROI / rent do you expect when you do improvements? What am I not thinking about that I should be? Appreciate all your input and advice!
Spackle the imperfections on the walls, prime and paint.
Is the carpet 'meh'? Then install luxury vinyl flooring.
Simply making the flooring and walls look nice can make a huge difference.
Aside from that, if the appliances are junk I upgrade.
I bought a small portfolio and had to evict a guy for nonpayment a few months ago. He was paying under-market - $400 per month.
I spackled, primed and painted, pulled the crappy carpet and put in luxury vinyl flooring. We replaced the tub surround and the fixtures and I bought a new fridge and stove (the prior tenant stole the fridge).
Now it's rented out for $575 a month.
In a market like So-Cal, if you do the above, you'll be reaping a lot more than +$175 a month if you do what I did.
Pends on long term goals also. Why not protect the building from outside in. Insulation, windows installed correctly, exterior water management. Amazing how many places are letting water get in and routinely soak walls wether it’s right behind the drywall or it gets to the inside drywall. Lots of mold sitting there. Tenants may love new flooring n paint or whatever but if you explain to them what your doing by properly fixing some of these exterior things they’ll mostly understand and be ok with not having a moldy musty smell behind the walls in paces.
A lot of upgrades have to do with your type of client, neighborhood and building/asset. Is this a rundown C-D area or is a gentrifying area where if you upgrade new flooring and appliances, bathroom etc… you could get xxxx dollars more for the rent
Depends on your overall strategy, and the area you are in. I have several C properties that we have been able to improve by doing what @Karl B. mentioned, as well as some necessary upgrades to major components like plumbing or roofing. Our strategy is to BRRRR as much as possible, so we can continue to scale. We have found that if we can purchase a property in need of some basic TLC, we can easily and fairly inexpensively update and improve them to justify a sizeable rent increase. This in turn helps us maximize the cash out at refinance. We also find that if we do certain upgrades, mostly cosmetic, other landlords will follow suit. This helps to up the market rent in the area which helps all of us long term. Hope this helps!