Is a roof deck on a multifamily worth building?
I have 2 properties that could benefit from roof decks, a 3U that already has a common yard and a back patio exclusively for the ground unit, and a 4U that the ground unit has a private yard. The latter is 3 large units with a basement studio. All the units in both rent for between 1400 & 1800 excepting the studio.
So, do I just try and figure out the payback period for the investment like any other property move? I've heard prices up to $40/ft! Both would also require extensive stair work for access. But it's not clear to me what premium I can charge in that price point. My gut is that it's a far more important feature when selling a condo than renting an apartment, but I often hear from tenant prospects how much they'd like it. If it costs $25k per deck and I can only get $150/month more for the 2 units per per property that have no deck currently, does that make financial sense? That's a GRM of 13.8. Would I even get that much more? I guess I'd have to speak to local rental agents for that. Anybody been down this road?
We are facing the same decision. We have a full-gut rehab coming-up and are contemplating adding a roof-top deck - there is no yard and the rooftop offers an amazing view of the harbour.
We have the option of either an internal or external stairwell. Internal would be more functional, but would also make heating a little more challenging during our winters.
In the end, the question is whether a $100 - $200/mth bump in rent is worth the extra costs.
Johann Jells check with a really knowledgeable sales and leasing agent.
In Brooklyn for a 300sf backyard that was nicely finished with privacy screens outdoor furniture, BBQ etc... I was able to get close to 50% of the sale sf price when I sold. On the rental side I was getting about 500 per month bump. No sure how to would translate to a deck never did one but I heard the numbers are similar.
Johann Jells I live in Brooklyn and I definitely would pay more for roof access. But you have to come out similar buildings with and without roofs to see if the ROI is there on the rent premium annually vs what it would cost to build. Definitely reach out to some other owners, leasing agents, etc in the area and see what they say. You never know who knows someone that’s done it and how much it should cost or know someone who specializes in them and might be cheaper.
That would be a step too far for me, but the luxury apartment just built down the street has one.
I feel the headaches and worries would not be worth it for me. And then some guy is going to bring his charcoal grill up there! Give you insurance agent a call.
Also you open yourself up to the mandatory allowance of satellite dishes.
As for tenant prospects: I have a beautiful yard on my multi with nice picnic tables- definitely a selling point for tenants, the prospectives love it... It is never used.
Hi @Johann Jells I would first call your insurance company and see how much your insurance would go up. We wanted to add a second floor deck to one of our rentals and the extra insurance costs helped make our decision.
Good luck!
Thanks all. @John Hickey, what was the rent that $500 was added to? I'm pretty sure it was more than $1800. I never thought about the insurance, that's worth a call.
@Johann Jells, a couple comments from my perspective:
1. Do your market research to get as accurate a guess as possible on the premium a roof deck garnishes; check with real estate agents, check prices of other apartments that have that feature, maybe take a pole of renters, etc.
2. As @Lauren C. mentioned, ensure that your costs will not go up. In this scenario, I'd be particularly concerned with insurance.
3. Depending on your hold strategy, I'd place an emphasis on the increase in FMV that will come with the added cost, maybe more so than payback period. FMV = NOI/CAP (NOI in yearly income and CAP in decimal format). Figure FMV out as your property stands now, and what it would increase to with the addition of a roof deck.
Hope this helps, even if just a little!
#2 General Landlording & Rental Properties Contributor
Not worth the expense. It is a luxury item and not a necessity that would increase the value of the property or the rent. Bottom line you would see zero cash flow for years down the road to pay for cost.
Originally posted by @Thomas S.:Not worth the expense. It is a luxury item and not a necessity that would increase the value of the property or the rent. Bottom line you would see zero cash flow for years down the road to pay for cost.
I would disagree as to the property value, but this is a long term hold. It would definitely increase the rent, the question is by how much. Zero cashflow for years is normal for capital investment, the question is how long! And if I borrowed the money, it might not even be zero.
Johann Jells there is some good advice above. Check what an insurance agent. Some of the others are way off base. This a market knowledge Q. I would say brooklyn and Jersey have some parallels. I fudged the numbers a bit. I owned that property for 11 years an the yard was always included. I def got my ROI back when i spruced it up.
I sold the house recently for 1.7m. It was listed for 1.5. PSF was 787. I think the backyard added tremendous numbers to he bottom line. The property was on the market for 2 weeks before we took an offer 200k over asking. That’s the way I like my sales to go. I do that on purpose.
The rents started out at 1100 I raised them to 1300, 1600, 1800, 3,000 5,800 on that apt. I got the biggest ROI when I fixed the backyard at 1800. It’s hard to tell how much it added but the brokers told me 50% of the indoor price monthly. So the apt was 700sf 3k rent 300sf outside is 1200$. I took the average of years of owning it.
Thomas S. Said it’s a luxury item. I would agree. He said I wasn’t worth doing(paraphrasing) I disagree. For me it made many things possible that otherwise wouldn’t happen. I like luxury tenants. To each his own.
Not t say I don’t make mistakes but i did pretty good with that buildomg. Plenty of other landlords said don’t do anything outside not with the money. They also thought I was lying when I told them I was getting 5800 I actually had a landlord tell me I was lying there was no way I could get that amount.
When I can raise the rent from 1100 to 5800 in 11 years I’ll do that 1000x.
@John Hickey just realize you will be adding a feature to be enjoyed by the community, so it is very different from a private yard in Brooklyn. It could become a point of contention among tenants (and neighbors). I see it as an unnecessary liability in my market. Knowing Jersey City and having lived there I can't imagine you are competing with the semi-luxury rentals so there is a definite rent ceiling for your market.
Best of luck
@John Hickey That's quite a run up! JC has had a great run too, but not quite like that. Rents have not kept up with sales. The 50% rule is interesting, at least it's a place to start. I'm sure there's limits, like my 3U place has a 325sf ground fl extension that could be a deck for the 700 sf 2nd floor unit if I did the work. I doubt you could apply it in that case, the proportion of deck to apt is so lopsided.
OT to my OP, the real thing to do there would be to add 2 more floors to the extension, but I doubt the footings are up to it. and then I'd have to teardown the current extension. How much lost rent from making the place uninhabitable is worth adding 750 ft to the property? I'd probably need all 3 vacant!!
Johann Jells Patrick M. My rents weren’t typical of the area, “other landlords thought I was lying about the amount I would get in rents”
Rentometer says average rent for a 2 bedroom is 2600, 3 bedroom is 3100.
Those numbers take work. I spent 11 years learning the market and tweaking the units. I look at an apt building like it’s a project. I come up with a plan in the very beginning. Then step by step as my budget allows I move toward the goal. As I go I increase the ROI. In the very beginning I planned decks on the 2,3 apts. I missed that goal bc I didn’t want to deal with the permitting process. Looking back I waisted I had done it at the start.
One thing here. Keep in mind that if your not the best apt for rent in a gentrifying area you don’t get the luxury tenants. My experience is in that in that area you want the best tenant you can get.
Can you guys post pics of your apts? Sometimes there’s stuff you can do first before you do the biggies like roof decks. I attached the listing below so you can see what got me that kind of rent.
Attn Mods:
Here’s a link to the Building we’re talking about. Please note I sold this I’m not posting to advertise it. I have nothing to do with the Building and it’s not for sale
https://www.corcoran.com/nyc/Listings/Display/4778829?gclid=EAIaIQobChMIj-b_gNXW1gIVSWSGCh0GEwzTEAAYASAAEgK2xPD_BwE
@John Hickey I don't doubt for a second that you did your homework, dedicated yourself to improving your property and as a result increased your rents. My point is that you cannot with certainty say it increased it by $500 in the white hot market that was Brooklyn. All landlords saw a significant increase in rents from 15 years ago.
For those that are not in the know- a tenant in Brooklyn actually pays a broker to find them an apartment- we could all only dream of such demand.
Additionally, comparing - private deck/terrace to a multifamilies shared use is significantly different.
There is a tremendous amount of luxury and semi-luxury apartments in JC. Pool/Gym/terraces and shared event spaces. And they are continuing to go up. OP needs to identify his ceiling- because it is there.
I am very impressed that you got out of Brooklyn when you did as it seems to be settling down quite a bit. That was well done.
My biggest concern would be how much more will it cost to fix the roof when there is a deck and other stuff on top of it
Originally posted by @Jassem A.:
My biggest concern would be how much more will it cost to fix the roof when there is a deck and other stuff on top of it
Trivial if you design it correctly. I've looked at several modular decks on flat roofs which can easily be lifted in sections.
Originally posted by @Patrick M.:There is a tremendous amount of luxury and semi-luxury apartments in JC. Pool/Gym/terraces and shared event spaces. And they are continuing to go up. OP needs to identify his ceiling- because it is there.
I'm not in the luxury game. This is large city of a quarter of a million people. These properties are in the gentrifying area of JC Heights, not the Downtown Waterfront area of luxury high-rises like you described. I'm just trying to do what any smart property owner would do and improve the property, within cost-effective reason. This is really no different than upgrading appliances or flooring for more rent and better tenants.
@Johann Jells that is exactly my point, you have a defined ceiling to your rent. If you will not require going beyond that ceiling (which you can't do) to be profitable and it works out in other ways- liability, structurally, variance, etc. then you have your answer.
Best of Luck
Originally posted by @Patrick M.:
@Johann Jells that is exactly my point, you have a defined ceiling to your rent. If you will not require going beyond that ceiling (which you can't do) to be profitable and it works out in other ways- liability, structurally, variance, etc. then you have your answer.
Best of Luck
According to rentometer I'm nowhere near the ceiling. And by the nature of gentrification that is definitely a moving target.
I see- if that is the case I would be more concerned with getting my rents up to market rent.
#2 Contractors Contributor
- Severna Park, MD
Its a multi family , so what happens when 2 different tenants decide to entertain guests on the same evening . What happens when one of these guests gets drunk and goes down the steps . Who cleans up when nobody had a party but there is trash everywhere . Who is responsible when the drunk guys start dropping water balloons on people on the street .
Originally posted by @Matthew Paul:Its a multi family , so what happens when 2 different tenants decide to entertain guests on the same evening . What happens when one of these guests gets drunk and goes down the steps . Who cleans up when nobody had a party but there is trash everywhere . Who is responsible when the drunk guys start dropping water balloons on people on the street .
Why would the roof top terrace need to be a common space? Why not have it attached to a particular unit (or units) with ready access to the roof?
Our research to-date has yielded that it would be more valuable (from a rent perspective) if the terrace was part of a single unit.