Which easy renovations add rental value to my property?

Management, Remodeling, Tips And Tricks

Being an owner of multifamily and other rental properties gives me good insight on what things I can do the increase the value of my rental properties in the eyes of potential tenants.

Most people want easy and inexpensive. Other can go a bit further and some go all the way, stating, I don’t want to do this again anytime soon, referring to remodeling in general, opting to go full-out and update an older apartment, but most of us fall in the former category which is probably the best place to be if you want value for your renovation dollars.

easy renovationThe Easy And Essential.

  • Make sure the place is clean, and I mean really clean, even in the nooks and crannies.
  • Fix stuff so that it works.
  • A good cleaning is often a good renovation, especially if you’ve neglected this before.
  • Paint is inexpensive and colored paint is not much more. Meaning that you can paint an accent wall or a room something different, something that is in style besides all white or all beige.
  • Electrical plates are cheap and can make a huge visual difference.
  • Toilet seats and the like.
  • Really anything that would make someone queasy or squirm needs to go.
  • Did I mention cleanliness… yes, I did, but it bears repeating.
  • Those are the essentials. You would be surprised how many owners skip these simple steps and lose a lot on this.

A little bit more, but still easy renovation.

You can spend a little bit more to add pizzaz to a property. These are things that add value and last.

  • Upgrade faucets.
  • Change out the lights. You can get some really nice lights for great prices, even in places like IKEA. Don’t add that common stuff from Home Depot with no style. Just look at what IKEA has..
  • Add a glass tile back splash in the kitchen, over the counter top. This has been very popular and looks expensive, but it’s not.
  • Change out the cabinet handles in the kitchen.
  • Get rid of the carpet and put in tile or laminate flooring.
  • If you the laminate and/tile, change out the baseboard and put in the taller ones. They are really nice and inexpensive, a great value indeed.

Okay. I can go on. There are lots more things you can do and this will give you a good start. Remember though, the number one complaint I hear from those looking for a place is the lack of cleanliness.

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How Much Money Is Your Neighbor Losing You On A Sale?

Selling

I really dislike using ugly photos on this website, but it certainly makes a point. Your neighbor can cost you thousands if not tens of thousands of dollars in lost value on your home when you’re selling it.

The photo represents just one case where a property sat on the market long and sold for less than it should have, had this view not been there.

It could be as simple as the color of a house, but common symptoms include, excessive cars in the driveway, on the street, un-kept yards, messy front yards, un-kept homes. The list is long.

neighbors_515

In one case, in a cul-de-sac a client seller’s home was next to a home that was nice, except that they kept 3 cars in the driveway and 2-3 cars in the street.

Even though it was legal, the cars looked normal, it was unsightly and it was also the reason it took nearly twice as long to sell and the price could have been at least $10,000 or 5% more had the number of cars been normal.

How much will the view in the photo above hamper the sale of the property? It’s hard to say, but it’s not something you want a potential buyer to see.

What can you do about it? It depends. If what the neighbor is doing is against regulation you can complain to the city, but sometimes you can’t, like in the case of a house color.  Maybe talking to a neighbor will help.

 

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Triplex In The Coronado Historic District Just Sold

Sold, Triplex

This was one of my favorite properties to sell. It was clean, well maintained, well managed and it has great tenants. On top of that the area is very central and quickly gentrifying.

Here is the description.

This is one of them. It has all the characteristics of a property you would want to own as an investment. Or one where you occupy one unit and rent out the remaining two units. Three units: Two 2 bedroom units and One 1 bedroom units. Each has a private yard in the back which makes it very popular with tenants. Recent improvements include a new roof (2012) and 2 new A/C units (2012). It’s near ASU and the business districts in Midtown and Downtown Phoenix. Highly walkable with lots of popular local restaurants near-by.

It was listed for $239,000 and sold for $243,600 in 6 days.

The property was built in the late 1960′s with Two 2 bedroom and one bath units and One 1 bedroom unit. Each with a private yard and off street parking. It has many characteristics that make it a very good buy for the new owner.

Hire us to sell your Phoenix area multifamily property.

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Buy An Income Apartment Leased or Vacant?

Buying, Multifamily Investments

When buying income multifamily properties most investors prefer to have apartments that are leased. It means instant stability, instant income to cover the expenses and it means less hassle up front with having to market properties for rent, checking tenants out, preparing the units and organizing move in.

For the most part it’s often good to have units leased, but there are cases where it may be better just to have a vacant property.

Note: When buying 2-4 unit properties vacant properties are not worth less then ones with tenants. The value is not as dependent as with large complexes in the commercial realm.

Traditional Sales

When purchasing a property sold traditionally from an owner who has had it a while, many years and is not in financial distress then a property that is leased is a good thing. You can have some more assurance that the customers – tenants – have been selected well and are paying market or below market rents. In other words the property is stable and shall remain so with little hassle.

Flipped Multifamily

Then there are traditionally sold properties that are from new owners, or investors who recently purchased a property in distress on the open market or at a trustee sale with the specific intent of fixing it up, leasing and selling to a new owner.

I would be more weary of these properties. Besides checking the quality of the remodel which is a topic for another post, I would do extra due diligence with the tenants.

These flippers have a tendency of leasing properties to tenants at rents that tend to be over market. Sure the units are remodeled and it may be fair to lease for a rent that is higher then other non remodeled properties, but often the tenants willing to pay more then they should are less stable customers who often have to pay more then market rent because of their credit situation.

Most people won’t pay over market for long. These tenants may be gone when the lease ends or they may have a harder time paying rent and have to leave sooner. This is costly and a hassle, even if the eviction process is quick in Arizona.

Not all cases are like this: the key to keep an eye out for are over the market rents.

Distressed Short Sale and REO Multifamily

When an owner is in distress they are more likely to take tenants that are bad customers. They just put someone in that may or may not be able to pay the rent. These are last ditch efforts to keep a business going. Others will quit paying the mortgage and simply stick anyone in to ‘milk that property for at lease a few more grand’ before the bank takes it.

Not all owners are like this, but the decision to take this route is often born from necessity more the spite.

Then once the owner decides to do a short sale or let the property go to the bank, they also let management go and let the property go into disrepair, favoring keeping cash in the pocket rather then putting into a property that they are losing.

Many of these get taken over by a bank and banks can’t always throw these tenants out. So it is up the the buyer to be careful.

As you can see, there are many situation where it would be better to just buy that triplex orfourplex vacant rather then having to deal with problem customers.

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Multifamily Insights – How’s Your Water Bill

The Money

Depending on the property water bills will very a lot of a little, but many of the factors are in your control. Most 3-4 unit properties will have this basic set up.

Signing a contract, selective focus, space for copy, canon 1Ds mark IIIOwner pays water – sewer and trash. Anytime a tenant does not pay for something it will be subject to overuse and in some cases abuse. That means if the toilet is leaking it will lower your income and increase expenses, but you’re unlikely to know about it for a while since the tenant really has no motivation for letting you know, unless you make it easy for them to do it, or if you ask.

For a basic property with no grass to water, with desert landscaping, expect bills to run at an average of $40 per unit.  This can rise dramatically if you have grass and it can be enven higher if the tenants each have their own washer and dryer. If that is the case you can see bills at $60-90 per unit.

It would seem that you can price it into unit rent price, but that’s not always the case. You can get a premium for the unit having a private washer and dryer, but that premium rarely includes a premium for water use. Take that into account when valuing the property for purchase.

One way to keep on top of lease and lose valves is to ask tenants once in a while if they have any drips or runny toilets. If you send out statements you can include a form that a tenant can fill out with any issues. Be careful with this one as it can open up a Pandora’s box with certain tenants. It’s a balance. Also inspect your property: walk it once in while: look for wet spots on the ground, talk to tenants if you see them.

Water costs are some of the largest monthly expenses aside from a mortgage, so it’s worth keeping an eye on usage.  Just a small leak can cost you hundreds of dollars and even several consistent runny toilets can cost you enough to make this extra effort worth it.

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