Professional · Wayne, NJ · Member since 2015 · 21 posts · 9 votes
I own multifamily buildings with a lot of vacancies. In order to get the vacant apartments back on the market they need extensive renovations. I've done the calculations and it totally pays to renovate in towns such as North Bergen that will let me increase the rent 50% above the last registered rent (these are rent controlled buildings)if I spend $8000.00. Where I can't raise the rent I'm thinking it doesn't pay to do expensive rehabs especially where the rents are artificially low. The low rent property is in Union City. I'm thinking just spend the minimum amount to get them back on the market .... nothing fancy. I'm thinking that if the rents are way below $1000 per month than keep the apartment basic... nothing new if possible.... just clean, repair what's necessary and make it functional. Where the rent is above 1000.00 a month I might pop a new kitchen or bath in because I will make back the investment in a year. Thoughts?
Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
9y
How long have YOU had this building,, lack of attention to the vacant units was just plain poor business so good your turning it around.
Get the vacants up and running,, do as much as your pocket book will permit,, work and get units done and ready to show 1 by 1 so your not spread out working on several and not getting any thing finished. Focus on I need this apartment done by the XXX so you have it rent ready.. Start showing as soon as feasible.
Focus on main elements,, If the cabinets are worth saving Paint them, make sure plumbing and heat is working and the main source boiler is working.. Flooring keep simple no carpet if you can. Bathrooms eat up a big chuck and if the wall tile is decent you can respray the tile and it will look great, and respray the tubs. Paint goes along way,, pick a neutral color and use it in all the units,,
Your contractor may have great ideas but the key is to work within your budget get the units done one by one and rent ready every day they are down your loosing money.. Keep close watch on what's getting worked on, and your receipts
Real Estate Investor · Dayton, OH · Member since 2017 · 107 posts · 51 votes
9y
I'd say your on the right track. There are smart, but cheap ways to spruce up a place to make it generate more income. Think: there is a reason why you have so many vacancies. If you add just a little of this and a whole lot of nothing too costly, I'd say your investments should bring you quality tenants, who will take care of the property (hopefully) which will bring you more rents, which is likely to be on time, probably less repairs overtime assuming you've fixed things properly during the re model and so forth. Of course this is all in a perfect world, but your chances are much greater.
Professional · Wayne, NJ · Member since 2015 · 21 posts · 9 votes
9y
Thanks @CandacePostell. Actually, you are partly correct. The reason there are so many vacancies is not because of the location. The location is great. The problem is the condition of the apartments and that the previous manager/owner was barely reinvesting in the property. Some apartments have been sitting vacant for quite some time, while others for less than 1 year. I think you are right about fixing things properly so there will be less repairs. In addition, sometimes just having the place look great and be functional without breaking the bank (even though rehab costs are fairly high) will help me get the right tenants who will stay for a long time. What are the smart ways you have found to spruce up your places? That would be helpful. I'm putting in new kitchen cabinets (to replace the old 1950's maple cabinets) and new bathrooms. Tiled kitchen floor and laminate floors throughout where the old wood floors are damaged. Also, removing any thing tacky (think old linoleum, rusty radiators, cracked moldings) and making the apartments look classy is my aim. I think they are coming out great because my contractor is awesome and has wonderful cost saving ideas and his workers do quality work for a fair price. Even the contractor's workers have inquired about renting the apartments when they are done! So it will be hard to resist not spending as much money on the units where because of rent control I can only charge 600.00 to 700.00 per month.
Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
9y
How long have YOU had this building,, lack of attention to the vacant units was just plain poor business so good your turning it around.
Get the vacants up and running,, do as much as your pocket book will permit,, work and get units done and ready to show 1 by 1 so your not spread out working on several and not getting any thing finished. Focus on I need this apartment done by the XXX so you have it rent ready.. Start showing as soon as feasible.
Focus on main elements,, If the cabinets are worth saving Paint them, make sure plumbing and heat is working and the main source boiler is working.. Flooring keep simple no carpet if you can. Bathrooms eat up a big chuck and if the wall tile is decent you can respray the tile and it will look great, and respray the tubs. Paint goes along way,, pick a neutral color and use it in all the units,,
Your contractor may have great ideas but the key is to work within your budget get the units done one by one and rent ready every day they are down your loosing money.. Keep close watch on what's getting worked on, and your receipts
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
9y
Start marketing. If you have vacant apartments now is the time. See what competing units look like so you are a notch above but don't over-improve. Check on refinishing wood floors there is a lot that can be done with floors that look terrible. Time and again I have seen some nice results on floors that looked like trash but run the cost difference. Kitchen new vinyl is fine but if it is not torn up don't replace it in those rent control places. Radiator covers for your rusty radiators providing they are otherwise sound. For bathrooms if they don't have cabinets add them. People like storage. Paint kitchen cabinets and get some new laminate countertops only for the really dated ones. Also a backsplash can add color to your painted cabinets at a low cost. Never paint plain white, always a shade different. If the outside of your place looks run down people won't come in so make sure you spruce it up as the snow melts..
Real Estate Agent · Ridgewood, NJ · Member since 2016 · 32 posts · 20 votes
9y
Hi June! I'd be very interested to know the contractor you're using. As an agent in Hudson County, I'm always on the lookout for more quality vendors to recommend my clients. If you could PM me their info, it would be much appreciated! If there are any recommendations for other services you might need in the area, feel free to reach out to me
Hi June! I'd be very interested to know the contractor you're using. As an agent in Hudson County, I'm always on the lookout for more quality vendors to recommend my clients. If you could PM me their info, it would be much appreciated! If there are any recommendations for other services you might need in the area, feel free to reach out to me
I would love to give you his name but I have so much work for him at this time that I'm not willing to give up his name just yet. Ask me in a few months.
Professional · Wayne, NJ · Member since 2015 · 21 posts · 9 votes
9y
Thank you everyone for the good ideas. The catch-22 is I need to spend at least $ 8000.00 in order to increase a 400.00 a month rent to 650.00 a rent, or 50% increase from the last registered rent. Painting does not count, but refinishing floors might.
Investor · in, MI · Member since 2013 · 226 posts · 102 votes
9y
Well there are 2 different kinds of renovation.
1- "renovating" due to deferred maintenance and neglect just to keep the property up to standards.
2- renovating to bring in a new class of renters and to elevate the property to a new level.
It sounds like you are in position 1 where you can't rent the apartments out due to their poor shape. In that case you need to renovate, but be sure to not "over renovate"
Thanks @CandacePostell. Actually, you are partly correct. The reason there are so many vacancies is not because of the location. The location is great. The problem is the condition of the apartments and that the previous manager/owner was barely reinvesting in the property. Some apartments have been sitting vacant for quite some time, while others for less than 1 year. I think you are right about fixing things properly so there will be less repairs. In addition, sometimes just having the place look great and be functional without breaking the bank (even though rehab costs are fairly high) will help me get the right tenants who will stay for a long time. What are the smart ways you have found to spruce up your places? That would be helpful. I'm putting in new kitchen cabinets (to replace the old 1950's maple cabinets) and new bathrooms. Tiled kitchen floor and laminate floors throughout where the old wood floors are damaged. Also, removing any thing tacky (think old linoleum, rusty radiators, cracked moldings) and making the apartments look classy is my aim. I think they are coming out great because my contractor is awesome and has wonderful cost saving ideas and his workers do quality work for a fair price. Even the contractor's workers have inquired about renting the apartments when they are done! So it will be hard to resist not spending as much money on the units where because of rent control I can only charge 600.00 to 700.00 per month.
If cabinets are salvageable, paint them and put new hardware, neutrals paint colors throughout, light fixtures, neutral laminate countertop, no carpets, tub/shower surround, stainless appliances (if you supply them) The key is clean simple lines. Nothing too busy, but not too plain and dull. These are all simple fixes that will not the break the bank. Of course depending on ur budget. That is key. Dont go over just to try to accommodate. Just prioritize. But it sounds like you know this already and that you are headed for success!
Thank you everyone for the good ideas. The catch-22 is I need to spend at least $ 8000.00 in order to increase a 400.00 a month rent to 650.00 a rent, or 50% increase from the last registered rent. Painting does not count, but refinishing floors might.
$250/mo rent is $3,000/yr
$3,000/$8,000 is 37.5% return on your money. Anything above 20% cash on cash return is a no-brainer.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
The reno's are part of your marketing to keep your units competitive. Failing to reno is failing to market and be competitive. Your investing in the equity of the units and the long term cash flow, not just 2017 YE profitability.
Thank you everyone for the good ideas. The catch-22 is I need to spend at least $ 8000.00 in order to increase a 400.00 a month rent to 650.00 a rent, or 50% increase from the last registered rent. Painting does not count, but refinishing floors might.
$250/mo rent is $3,000/yr
$3,000/$8,000 is 37.5% return on your money. Anything above 20% cash on cash return is a no-brainer.
Kurt, I appreciate the calculation you sent me. It makes a lot of sense and clarifies it succinctly. Thank you. If I can spend less on the renovations than the return on my money will be even more so conservatively renovating makes the most sense.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
June Veenstra Age of the property can be a determining factor when looking at it. Fun stuff like asbestos and lead-based paint can be costly and take time. That said, it wouldn't take too much calculating to deduce a payback period and if it makes sense. Plus, if you're in a high tax bracket it doesn't hurt to start the depreciation clock going with improvements like new cabinets.
Professional · Wayne, NJ · Member since 2015 · 21 posts · 9 votes
9y
@Andrew JohnsonHow does the age of the property factor in? I can figure out the payback period for investing in order to get a vacant apartment back on the market and after anywhere from 1/2 a year to 1 1/2 years I've paid myself back and then I'm clearly earning much more money than before. I just don't know when to stop improving as new units become vacant .... if I can raise the rent it pays to improve them .... but it could cause a current cash flow situation since the payback is long as 1 1/2 years. That's why I probably can only rehab so many units per year. (Unless I borrow a bunch of money) I have 11 vacant apartments currently and can't anticipate when anyone else might move out. My plan is to get the 11 apartments back on the market the least expensive way possible, while maximizing the rent. Then as apartments become vacant continue to renovate if necessary or if I need to in order to get the rents higher. Those other problems like asbestos, etc. mean that I need to have money in reserve to deal with violations and other issues.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
June Veenstra Age isn't specifically relevant but you do run into the potential for issues. Meaning what you think will cost $8K will cost $12K. And if it's really old and renovations are significant you never know what was (or wasn't) done up to code. If you want to hold onto the units for 20 years, it isn't relevant. If you want to hold onto them for 2 years it could be.
I'd say your on the right track. There are smart, but cheap ways to spruce up a place to make it generate more income. Think: there is a reason why you have so many vacancies. If you add just a little of this and a whole lot of nothing too costly, I'd say your investments should bring you quality tenants, who will take care of the property (hopefully) which will bring you more rents, which is likely to be on time, probably less repairs overtime assuming you've fixed things properly during the re model and so forth. Of course this is all in a perfect world, but your chances are much greater.
Good luck
I've never thought about renovations like that. Well put.
Professional · Wayne, NJ · Member since 2015 · 21 posts · 9 votes
9y
@Andrew Johnson While renovating this 1940's property, I'm seeing that plumbing and old rotting pipes are an unexpected issue. It has added at least $1000 per apartment to fix the plumbing issues where there is evidence of a past or current leak, or the pipes look rotted out, when a wall is open and we can see it. If there is no evidence of a current or past leak should a wall/ceiling be taken down now while renovating? If so, that would probably be too costly. Im thinking if it isn't broken now don't fix it. Am I on the right track here?
Investor · Annapolis, MD · Member since 2014 · 25 posts · 5 votes
9y
On the plumbing repair, unless you see a common problem, like most of the bathtub drains leaked. I would not arbitrarily tear out the plumbing. But if you see a pattern then you need to address that. Good Luck with your new project.
Investor · Bellingham, WA · Member since 2010 · 308 posts · 230 votes
9y
@Andrew Johnson if the drains and supplies are galvanized from the 1940s it's just a matter of when they'll fail not if, with the walls open now is the time to repipe... not when the unit is finished with a tenant in place and there's water damage to both the building and the tenant's belongings.
Flipper/Rehabber · Union City, NJ · Member since 2016 · 25 posts · 8 votes
9y
une, I rent 4 apts in Union City, and never have I had a month unoccupied. the demand is just too high. Currently renting a 4 bedrooms for $1900 per month. Do a lot of renovations myself, but still UC has high demand area.