How To Turn Around an Apartment For Profit
Buying a property below market value is a dream come true for any investor. Who wouldn’t want to buy a property for pennies on the dollar? What comes with the low price tag though is not to be taken lightly. Deferred maintenance, issues with tenants and/or mismanagement are just a few of the problems that can come with those great deals. Buying an apartment is one thing. Turning around an apartment so that you can increase rents and sustain a healthy profit however, is a whole other ball game.
These are several key activities that a property owner can do to turn around an apartment that is neglected or turn a low income producing property into a cash cow. Like with anything, you need a plan. Planning is everything!!!!! You need to identify all the steps required to reposition the property and have a clear understanding of the work to be done, the budget and the time lines. Allowing scope, cost, or schedule to get out of hand can be disastrous. That is project management 101.
To help avoid those disasters, here are some tasks that can be performed to get your under-performing apartment building performing.
|Bring in the Big Guns
Hire a reputable and results-oriented Property Management Company that has experience in stabilizing properties. Ensure they have the tools and software that will allow them to implement the necessary systems and procedures required to efficiently run the property..i.e. You need a system for collecting rents and procedures for the maintenance staff to deal with maintenance requests. You always need to ensure they implement stringent requirements to ensure quality tenants are acquired.
Microscope the Expenses
Analyze the expenses and sharpen the pencil. The operating expenses and capital expenditures need to be reviewed and identified. Find ways to cut expenses without affecting the quality of life of your tenants or the integrity of the property. Can you sub-meter each unit so all tenants will then be responsible to pay for all utilities? Can you protest the tax assessment for the property? Yes, you can actually negotiate your property taxes.
If a property owner is looking to turn around an apartment, then improvements will need to be made to his/her property. Sufficient research must be done to determine the level of renovations that is appropriate.
Understand the comparable properties in your area to determine your competitors. Find out what you need to do to the property in order to get the rents you want. You don’t want to spend any more money than necessary. Sales are all about knowing your customer. As property owner you are trying to “lease” your units, so understand what your tenants want and what they are/are not willing to pay for.
Work on some key aesthetics on the property. First impressions are important.
If potential tenants won’t come near your building because it looks unsightly, then you won’t be able to convince them how beautiful thee units are inside. You also want to focus on the vacant units so they can be turned over and filled with tenants willing to pay the higher rents. Then look to the occupied units and precede with those renovations once tenants leases are up.
It’s not an easy task to turn around an apartment. However with the right planning and experienced team members you can create a profitable asset. If you want to learn more about repositioning a property or how you can get involved in real estate, drop us a line. We want to hear from you! To find out more how investing in multi-family real estate can benefit you, sign up for our milt-family video series.
Remember, real estate doesn’t have to be complicated. With Simple Acquisitions it’s smart and simple!