Multi-Family Unit renovations - most worthwhile improvements?

5 Replies

Hello, when remodeling a multi-family unit,what renovations lend the most value to the sale price? I have completed several profitable sales in the past, but am always looking to improve the bottom line.

We bought a 60-70's circa 6-plex 3 years ago from an out-of-state owner. Rents were barely $1900/month with 2 units vacant for 3 years & a PM team that was robbing the owner blind.

Gutted the kitchens & bathrooms, added cheap carpet/flooring, some new doors & rents run $48K+/yr. 

Paint definitely has the most value in terms of ROI!

Don't have experience, but I imagine the easiest things are flooring, paint, and kitchen renov (add some stainless steel appliances, granite counter tops, and cabinets). Dramatically turns around a property for 20-25k in terms of cash flow

The best return on investments are always kitchen and bathrooms.  If it's not in the budget to fully replace the kitchen cabinets consider painting the cabinets, installing new hardware and counter tops.

I am currently renovating 25+ multi family suites per month and can tell you that we are refreshing everything in a unit that is older than the 90's for our clients.  New cabinets, floors, baseboard and doors, lights and switches, bathtubs and surrounds.  Floors are typically LVP rather than laminate floors as they are more durable, and hold up better in rentals.  We either reglaze or replace the tubs and tub surrounds.

The trick is trying to find economical products.  Always ask about contractor discounts and you will be surprised the discounts you may be offered.  

Some people are going to think an entire renovation is outrageous but peoples expectations are changing and the competiation is geneally not just a pool of rentals anymore.  We are also competing with a slew of new build condos for good tenants depending on location.

The rule of thumb that I generally see is that the increased rental rate should pay off the renovations in 5yrs or less or the budget gets cut until it is in line with this.  

The considerations for a larger reno budget sometimes go beyong the bottom line though.  Low flush toilets and LED lighting can shave money off the bottom line, but new plumbing fixtures also ensure there is no deferred maintenance to come up.  It's much cheaper to have a toilet and faucets replaced at the time of reno than midway through a tenancy. And having the switches and lights changed are an insurance policy in my opionion.  I can't tell you how many broken wires or bad connections we catch.

Aside from the increased value and rental rates, It often means less vacancy and a better tenant pool to select from.  

There are trades out there who specialize in renovating rental units.  It's a high volume low price business vs perhaps a home renovation where a home owners expectations might be much higher.

Cheers,

Ryan

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