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2 Valuable Renovations To Add To Your Multifamily Rehab Property

Key Takeaways

  • Rehabbing a multifamily investment property can boost your ROI, but only if you choose to upgrade the amenities homebuyers want.
  • In hot rental markets, a newly remodeled kitchen or bathroom almost always returns more than 100 percent of its cost when selling.
  • Attractive curb appeal can increase your property’s value by as much as 20 percent.

If you’ve dabbled in multifamily real estate investing, chances are you’ve asked yourself how you can add value to the property. Whether you’re on a tight budget or have plenty of cash, upgrading your multifamily rehab property is a surefire way to see an excellent return on investment. But how do you know which improvements are worth it?

Start by creating two separate lists: A list of “musts” and “nice-to-haves.” When making your budget, start by evaluating your “musts.” These are upgrades that need to happen if you want to sell your property with ethics and integrity. Next, you can decided where the items on your second list fit into your existing budget. Keep in mind that these “nice-to-haves” are what will drive up the value of your property.

The upgrades you choose to perform will depend on a variety of criteria including, but not limited to:

  • The location of your property.
  • The properties age and current condition.
  • The profile of tenants in your market (i.e. your target audience).
  • The rental prices of competing units.

When determining your ideal ROI on your multifamily rehab property, be sure to set realistic expectations. If your goal is additional cash flow, consider interviewing the tenants in your other properties (if possible) to see which amenities are most important to them. You can use their answers, along with the following information, to make your final decision on most important renovations.

2 Multifamily Rehab Property “Musts”

multifamily real estate

Many investors strive to target the worst homes in the nicest areas and add value through renovations. While this philosophy has its pros and cons, it overwhelmingly leads to success. If you choose to follow this route, start with these valuable renovations:

Kitchens & Bathrooms

If you have a construction budget, you’re going to want to make it count, right? To get a truly great return on your investment, start be renovating the kitchens and bathrooms in your multifamily property. In hot rental markets, a newly remodeled kitchen or bathroom almost always returns more than 100 percent of its cost when selling. Why? Firstly, because people spend significant time in these two rooms. Secondly, as stated so eloquently by architect Steve Straughan, “kitchens and baths are the areas in a home where you can tell if money has been well spent or not.” The last thing any new homebuyer wants is to walk into their new place’s kitchen or bathroom only to feel like they were teleported back a decade or five. Other rooms’ ages (think living room, guest room, office, etc.) can be disguised by well chosen furniture and a paint job; but the appliances that fill kitchens and bathrooms are always a dead giveaway of generation.

When thinking about how you want to redesign your multifamily units’ kitchens, think functionality and simplicity. More and more homebuyers are opting for open floor plans, so if you have to ability to knock down a wall, don’t think twice. Neutral color schemes, stone counter tops, stainless steal appliances, and wood floors are also always safe bets. Be sure that the style of your new kitchen flows seamlessly with the rest of the house as to not confuse prospective buyers.

Bathrooms, on the other hand, are all about the luxury and amenities. Automated toilets, heated floors, steam rooms, and walk in closets are taking the places of old fashioned vanities and bathtubs. In a recent poll conducted by HGTV, homeowners between the ages of 30 and 45, “don’t have time to even take baths.” Take advantage of this extra square footage and install a walk in (steam room optional) shower. If you still aren’t ready to say goodbye to your tub, it’s time to jump on the jacuzzi or whirlpool style bandwagon. It’s important to keep in mind that if you are remodeling an older unit that has only one bathroom, building an additional bathroom (as opposed to just remodeling the current one) is a better way to spend your rehab budget. In fact, an NAR study by Florida State University professors G. Stacy Sirmans and David Macpherson found that adding [an additional] bathroom increased the sale price of a home by 8.7 percent, more than twice the rate for adding a bedroom.

Curb Appeal

An attractive curb appeal can be the difference between a potential homebuyer driving past your property versus knocking on your door. An attractive curb appeal can also mean selling your home for 240,000 dollars instead of just 200,000 dollars. That’s right, putting money into your home or investment property’s exterior can increase the value of said property by up to 20 percent, sometimes more! (And who doesn’t want to pocket an extra 40 grand relatively easily?)

Next time you drive up to your multifamily home, try to look at it objectively. Note both its best and worst features and also pay special attention to the first impression you get when looking at it from afar. Ask questions like:

  • Is the paint chipping?
  • Is mold growing?
  • Are plants dying?
  • Are the rain gutters full?
  • Are weeds growing?
  • Is the deck or siding dirty?

Answering these questions truthfully can be difficult, especially if you feel a strong emotional connection to the home. Perhaps you lived for several years in one unit and rented out the rest to help cut mortgage costs and aren’t ready to let go. However, if you want buyers paying top dollar, identifying and rectifying unsightly faults is a must. On a budget? That’s okay! There are plenty of cheaper upgrades that can be done that will still boost the value of your multifamily property. Power washing your exterior is one (relatively inexpensive) option to choose from that will make your property sparkle like new. (Note that if you have existing chipped paint, a full paint job might give you a bigger bang for your buck) Repainting – or replacing – your front door is another way to give your multifamily unit style and character. At the very least, make sure your home looks clean. Start by disposing of trash, weeds, and other unnecessary garden tools.

Finally, it is important to assess your property’s curb appeal in the evening. Many potential homebuyers will be driving through your neighborhood after working, which means you better make sure your property is well lit. Considering installing a decorative street lamp or other attractive light fixture on the front porch. Keeping the lights on inside is always a plus as it depicts warmth and “homey-ness”, two things every homebuyer wants to see.

Never underestimate the power of an updated kitchen, bathroom, or curb appeal.  In an industry with so much competition, anything you can do to gain an edge should be done. Watch your multifamily rehab property fly off the market (and for top dollar) by implementing these design changes.

Have you ever rehabbed a multifamily investment property? What changes did you make? Better yet, which ones do you wish you made? Share your thoughts in the comments below.

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