One of the great aspects of being an apartment building owner is the ability the owner has to increase value in a variety of different ways. All of these methods for increasing value will not apply to every apartment building, however, I would venture to propose that there is not one apartment building in any state in this country that could not use at least one of these methods to create more value very easily. If you compare this ability to other investments like stocks or bonds you can truly begin to realize why so many fortunes have been built by investing in multi-family properties.
Forced Appreciation — Forced appreciation is any repair made on commercial real estate that “forces” the value of the property to appreciate.
Making cosmetic repairs makes the property more appealing to potential tenants while also keeping current tenants happier. Repairs that can have a dramatic impact on appearance include painting exterior walls, painting interior walls, repairing the landscape around buildings and replacing aged, dirty and worn out appliances.
This may seem like an obvious way to increase the value of an apartment building but it is truly surprising how many rental buildings are charging rent that is 10% to 20% below market rates. Many smaller apartment building owners manage the property themselves and thus find it easier to keep rents below market to retain tenants. This theory is flawed in practice because it doesn’t take into consideration that, nowadays especially, many people will move from an apartment for reasons having nothing to do with the rent. For example, many people relocate for better job opportunities in another city.
Replacing Utility Equipment:
If an apartment building owner is paying the electric bill for common area lighting he or she can save a lot of money every month by simply replacing all of the lighting fixtures with energy efficient bulbs.