40-unit - Recommendations on how nice to renovate Kitchens

9 Replies

Just bought a 40-unit garden style apartment complex. 

Advice on renovating kitchens as we turn occasional units: currently there are 1990s honey oak kitchen cabinets and a standard stainless kitchen sink with regular old faucet. Laminate countertops, white appliances.

Would you paint cabinets? I am planning on some stainless pulls for hardware. Gooseneck faucet? Replace with black or stainless appliances if they're old?

Or more 'leave it' and just throw on some pull handles. 

These are roughly $800 rent rate apartments with accepting section 8 tenants. Around 800 sq ft and they can get beat up a little bit. Tons of pretty identical apartments in the area so I'm thinking it would give me an edge if I do them slightly nicer. Or am I wasting money by doing them nicer (roughly $1000 more per kitchen). 

@David Walkotten i would consider painting the Cabinets white, New handles and New Faucet. Black appliances would do. 

if the counter top is not bad then you can resurface it.  

We recently did Paint, Granite and Black appliances and these rented much faster.

Granite maybe over kill in your location, but resurface would be a good alternative.

A lot will depend on how much the tenants beat up the apartments.  When we do rehabs in sec 8-type housing, we go for sturdy and clean.  Medium grade Delta or Moen faucet, single handle, no removable gooseneck, and often no sprayer either.  For some reason, the sprayers in lower end apartments become fun and games for the kids and end up breaking often and leaking.

We want the apartments CLEAN when they are shown.  Most tenants in that price range don't expect higher end, but the do appreciate fresh paint and clean smelling, bright kitchens.

Consider changing pulls, refinishing cabinet doors by sanding and varnish/poly.  I'm not a fan of painting cabinets--unless you are a pro and a spray painter, they just don't come out well.  Look at the lighting fixtures--think LED.  Flooring--if needed, we use solid vinyl planks, glued down, not floating.  We have seen the floating floors get wet at subfloor, and end up moldy/soft.   

Hope this helps, and congrats on the 40 units!

Regarding painting kitchen cabinets. Respectfully disagree with @Marc Winter. I painted old dark, but sound lower end 1980's cabinets white and put brushed nickel hardware on. Looks great a year later. Follow instructions given on youtube exactly. Clean with TSP, prime and paint with high quality oil based products and use a foam roller. Looks clean and modern.

@David Walkotten Congrats on the purchase. 

A couple of things about your question:

1) The rent amount & the fact you take section 8 tells me it's not a high end apartments building. In these cases, you want to keep your turnover costs to minimum because your will have a lot of it.

2) Once you paint the cabinets one, you will most likely need to paint it every turnover (which will be often). If you DO decide to paint them, go darker, white turns dirty real fast...

@David Walkotten Going off your post (Section 8 part especially), I would keep things simple and not try to do too much. You don't want to over improve the property. 

View everything as an ROI.

- Is spending an extra $200-300 worth it in additional rents? 

- How much of an edge can you get in a competitive rental market where price is the primary driver? 

You can also "tour" the neighboring properties the old-fashioned way - pretending you want to rent and then chatting up the property manager. This will give you a "boots on the ground" look at the your market while providing you with an idea of what your competition is doing.

What is your time frame and goal? Is it to slowly build cash flow? Or is it to boost the NOI to get to a refi ASAP.

Whats worked for me is to test the local market first.

Example: I am on the process of re-positioning one of our multifamily properties. A 30 unit value add.

What I did was on the first unit, which was vacant when we closed, was I did the minimal rehab. 

For this unit it was cabinets, light fixtures, paint and bathroom vanity. This unit was renting for $625. When we marketed the unit for $675 + $25 for water it quickly rented in 3 weeks. To me this was a sign that, for the area and product it offered value to tenants.

Second rehab I did all the same but added new floors and appliances for an additional $2.7k. That unit rented for $750 + $25 for water!

Since my strategy going in was to first maximize the NOI to improve my cash out refi amount, I decided that option 2 was the way to go. Because I planned to refi within 12-16 months it shortened the time to reach my target ROI via refi.

I have renovated 13 units thus far and have found that $725-$775 is the sweet spot, which hopefully keeps turnover down. We'll see. 

Had my strategy been to solely improve cash flow I may not have taken the more expensive route. 

So many variable to consider, hope this adds some value to you. 

Hi David,

I would perform a rental comp analysis. Find other apartments with "nicer" kitchens and see calculate the rent per square foot. As @Omar Khan said, you may need to visit these properties in person.

That way, you can determine the new rental rates of your units once you've upgraded the kitchen. If the costs are $1000 per kitchen, what is the estimated ROI based on the rental increases and how long do you plan on holding on the property? if the ROI is 10 years and you plan on selling in 5, then it probably doesn't make sense.

Really appreciate you guys all weighing in! It was a big help and I was able to walk through a few units yesterday that are ready to be turned to weigh in directly on the expectations & standards for renovations. @Theo Hicks I plan to hold the property for 10-30 years so I am looking both short and long term. 

Being that the kitchens are what you walk into from the main parking lot entrance, I decided to do add a bit there where I could. Some of the cabinetry is painted and I'll keep painted but touch up. Some is the oak and I will keep oak. Doing a high faucet with a nicer laminate. @Marc Winter Brushed nickel fixtures. One unit had a darker tile in the bathroom and the shower wasn't great so we are glazing the whole tile/tub combo white. @Joseph Gozlan @Ed Matson  @Hadar Orkibi

@Armando Payano  Overall, just adding a touch of flair in the details as a marketing tactic while remaining with the core philosophy of durable and clean. Like @Omar Khan mentioned the price is the primary driver.