Adding value to your multifamily property can be done in numerous ways, like upgrading kitchens and baths to allow for higher rents from current and prospective tenants. Additionally, expenses can be passed onto your tenant by separating utilities. However, investments such as these can be expensive. Read on to learn more affordable ways to add value.
First and foremost, do something that increases your properties profit to add actual monetary value. Decrease expenses or increase rental revenue may sound simple enough to add value. However, it is more involved than that. While you enjoy an increased cash flow, your southeastern NC investment property also increases value due to something is known as forced appreciation.
The way forced appreciation works: Capitalization rate (or cap rate) evaluates multifamily properties. Cap rate is the net operating income (or NOI) divided by the value of the multifamily property. Your net operating income increases when you decrease expenses or increase rents. If the same cap rate is used to evaluate your property, the value can only go up. Example: If four storage units have been added to your property and each one if leased for $30 per month, it will equal $1,440 per year. There are no noticeable expenses with storage units, which means this is all profit. Your property value is increased by $14,440 if it is evaluated at a 10% cap rate. This makes a great investment.
Another affordable way to add value is by creating a sense of security for the tenants. Tenants will move if they do not feel safe. Vacancy rates can be indirectly decreased by creating a living environment that is safe. Be sure your tenants are aware of any improvements you make regarding the property’s safety.
Investing in affordable amenities for your property is an intelligent way to add value. There are large, expensive amenities that you may add on big apartment complexes, like workout rooms and pools. But keep in mind, the main idea of an amenity is to make your tenant’s life easier. The only thing that matters is that your tenants use and welcome it, not the amenities cost.
Whichever affordable way you choose to add value to your multifamily property, you will see positive results. Many Wilmington NC commercial real estate owners utilize more than one affordable way which will multiply the added value.