In the world of real estate, there is always room for improvement! However, some renovations can actually decrease rental value. Read on for things to watch out for when seeking highest and best return on your apartments investments.
Over-the-top renovations can decrease rental value if it doesn’t fit with the neighborhood. Before embarking on a new rehab plan, see what is being offered by competitors in the area. There is an art to identifying upcoming trends. But, if one overshoots the market and loads up on expensive amenities that rents can’t support, owners get left holding the bag with big bills and no way to pay for them.
Carefully research area demographics and where the apartment market is moving in the next 3, 5 and 10 years. Not just your city demographics, but also your class of apartment property and your particular side of town. All of these can have dramatics affects on what rents and what doesn’t in your area.
Big, fancy renovations will cause a jump in rent. Be sure that area employers, the local job market, land prices, and ancillary services are there to support an appropriate upward trajectory. Being the nicest community is a goal. But being the ONLY nice property in the area is not. Overdoing amenities without the ability to recoup costs can eat up profits quickly.
Too Much Customization
Most people like to make their home their own by customizing it themselves. If you put too much of your own flair into renovations, your residents won’t feel like they can make it theirs.
You want your residents to be able to see themselves in this apartment. A space that is too “you” can turn them off. Appealing to general trends and not to your individual taste can take some throttling back of enthusiasm. Bright colors, trendy finishes and expensive materials can quickly fade from favor. Think longer term and classic, timeless combinations when researching color palettes and materials.
Using Cheap Materials
Cheap can be spotted quickly. We know that you pay for what you get. Invest in quality materials. Beware of close-outs and “fire sales” on materials such as flooring, countertops and plumbing fixtures. There are reasons why these materials are not selling and being offered at a discount.
Lesser quality materials have a shorter life and will require replacement much sooner. Instead, invest in quality upfront.
Take the time to shop your competition. Where are they in the life-cycle of apartment investing? Can you tell? Do you know what to look for? This can be a challenge to distinguish in Class B and Class C properties. Knowing what is a deal and where to invest rehab funds for the best return on investment is an art. A Goldilocks approach is best. Not too much or too little. There is a sweet spot to investing in upgrades and it can vary tremendously with every deal. Sometimes, it pays handsomely to walk away from a deal. Knowing the difference builds real wealth.
Skipping Prep Work
It can be tedious, but if you skip prep work it can spell disaster. The repercussions are the same as using cheap materials. Good prep work, especially in interior and exterior paint, can be spotted a mile away. These subtle touches speak volumes to potential residents.
If you don’t have much experience with contract work, a DIY Youtube video isn’t going to help much. Especially when it comes to apartments. Permitting in itself is a full time job. If permitting is not done correctly, there can be hefty fines involved, as well as the cost of re-doing the project over again to meet regulations. This is not the time to hire your brother-in-law.
Instead of risking ruining your apartment venture, you will do better to hire licensed contractors. They will follow your guidelines and have the experience to turn your desires into reality.
It’s better to invest in professional services with experienced contractors than face expensive repairs down the road or worse, finding issues that aren’t fixable. A professional apartment property management company can help guide this process and keep contractor costs within budget.
Overpaying for Renovations
An experienced apartment property management company has established relationships with vendors they have thoroughly vetted and utilized their services over and over again. They know these service providers will do a good job at a fair price.
Keep renovations simple and inexpensive. Don’t falter on quality. There is a happy medium to be found with both cost and quality.
Keeping Residents in the Dark
Not paying attention to lighting renovation can decreases the rental value of the apartment. Dark apartments with obscured entrances can be liabilities and increase risk.
Lighting completely creates the mood of the home. Blue light can energize. Natural light can even help symptoms of depression. The right light also brings out the colors of the home and the apartment community as a whole.
There are four types of lighting to keep in mind when doing your renovations: task lighting, general lighting, access lighting and accent lighting. You need a mixture of all of these to give your apartment units the right mood. Exterior lighting of community amenities is also important and also sets the mood. Peaceful spaces such as nighttime poolside and up lights at entrances and landscaping can change the entire look of a property with minimal expense.
Keep on top of lighting and make sure bulbs are replaced regularly. Burned out bulbs reflects on the property as a whole. It’s the little details that make residents feel at home and well taken care of.
One of the biggest mistakes one can make on any apartment rehab project is not knowing what you’re getting into. Even if you aren’t doing the work yourself, you need to know what’s going on so you know what your contractor is doing. Surprise change orders are not fun. Stay involved or hire a professional property management company to manage the renovation process for you. You or your property management team needs to be hands-on in the rehab phase so you don’t lose control of your own project. Detailed monthly reports helps keep things on track.
For tips on renovations that are good for your apartment complex, click here.
Will Your Renovations Decrease Rental Value?
The wrong renovations for your particular property can decrease rental value of your apartment complex. You don’t want to find this out during your project. Do your homework upfront, become knowledgeable on what amenities and services residents in your area are seeking and stay hands-on in the renovation process.
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