How to renovate an apartment complex with tenants inside?

Question

I've been looking at a 12-unit apartment complex. 9 units occupied, 3 vacant. There are many renovations I would do to the inside of each unit. Floors, painting, drywall, replacing fixtures, etc.

How can I do this while they are still under lease?

Or is my only option.... to renovate them while they're vacant and just tell the people the lease in unable to be renewed as they become available?

Patrick Philip · Answer

True. Except for 1 thing.

My end goal is to sell it as a stabilized asset. It would be kind of odd selling a complex with 11 luxury units, and 1 old junky one. Lol.

Jeff Kehl · Answer

@Patrick Philip as others have said, rehab the vacant units and list them at market rents. In the mean-time, for any unit that the lease is up, raise their rent to whatever the market rent/your goal rent is. Most of them will move. If not, you just got the financial prize without the investment so keep them as long as you can.

Keegan MacNichol · Answer

There's a few ways to do it depending on a multitude of factors, including financing terms, unit condition, lease up schedule, etc. Not knowing the specifics, I'd say a good going in argument would be to renovate the 3 vacant units as well as the exterior after closing then systematically work through the remaining 9 units as the leases expire. For the remaining 9 you have a few options:

- Renovate at lease up. If the lease up dates are staggered, you could do them 1-2 at a time as the leases expire.

- "cash for keys" to create vacancy prior to lease up. Could allow you to free yourself from underperforming leases  early, thereby allowing an opportunity to perform necessary improvements to bring units to market rent.

- As lease up occurs, raise rents to market and only renovate those that decide to move. Good option if you have decent tenants and the unit's below market for current condition. Allows you to defer major capex but still raise rents.

Matthew Paul · Answer

Renovate the empty units , then when someones lease is up, dont renew it , then let them apply for a new unit at hirer  rent .  Repeat the process over again . Also advertise the renovated units to the public , take the best tenants