As I wrote in my 2007 book Purchase, Rehab and Reposition Commercial Investment Property, repositioning multifamily apartment buildings has long been my passion, and has proven to be a pathway to profitability. It’s hard work, as investments go, but it has always been worthwhile. Most of the success our company has seen comes from Multifamily investment.

I have discussed the tried-and-true methods of realizing a property’s full revenue potential when exploring both Multifamily and other types of real estate: Rehab a place to make it more desirable, take advantage of a neighborhood on the rise, look for suburban locations with city access (to appeal to families that don’t want to pay urban-priced rent), and more.

When you’re looking to reposition a newly-acquired investment, here are some basic tips, as well as other -smaller and more off-beat- ways to improve the value of your multi-family building:

Start with the most obvious ways:

Rehab

With rehab projects like the one mentioned in my book — the purchase by our company of a 34-unit apartment building in Aurora, Ill., just west of Chicago. The place needed extensive work — everything from the planting of grass to the trimming of hedges to the replacement of light fixtures and smoke alarms (though not, interestingly, a new roof) — but it was something we readily undertook.

(One caveat: Because I hadn’t arranged for major renovation financing at closing and because the mortgage did not allow for a second mortgage, we had cash-flow issues early on, issues that led us to slow the spending pace and renovate apartments only when they were vacated. It was a lesson learned for me: From that point forward we laid out our rehab plan before closing the deal, not after.)

We recovered from this initial miscalculation to make the necessary improvements, and in time the property became not only profitable — it netted a considerable profit when we sold — but also praiseworthy, earning a Chicagoland Vintage Property of the Year Award.

Rent

When buying a multifamily apartment building that does not need that kind of extensive work, there is also the matter of raising rent to full market value. New owners sometimes balk at doing so, fearing that they will lose long-term tenants, but in my experience the holdover renters expect such an increase when new management arrives, particularly if they know they know they were getting a bargain to begin with.

The example I offered in the book concerned our purchase of a 24-unit property in Merrilville, Ind., 40 minutes southeast of Chicago. We painted the common hallways, hired a weekly cleaning crew, and added shrubbery and flowers outside, and as our tenants’ leases came due we offered to renew at full fair market value. We lost some tenants, but most stayed. In time we sold the property for a nice profit.

Location

Then there is the matter of finding the “hot” neighborhood, which can sometimes have little to do with the property itself. Take Rogers Park, on the north side of Chicago, where in one five-year period we netted a substantial return on investment. At one point it had been a gang-infested, crime-ridden area, but neighborhood stalwarts stood their ground and turned the tide, the result being that investors like ourselves soon flocked to the area.

Then move on to some of the less expensive and less obvious ways to make money off multi-unit apartment buildings:

Name

What’s in a name?: Renaming a property — i.e., rebranding made easy — protects you from any negative online search results that might be attached to the previous owner. If tenants registered their displeasure with that person, you will inherit that as surely as you do the keys to the place. Better to start anew.

RUBS

Ah, there’s the RUBS: In other words, implement the Ratio Utility Billing System, under which landlords bill a back portion of utility bills — water, sewer, electric, and garbage — to the tenant.

Think Like a Tenant

  • Watching the clothes go ’round: Installing a washer and dryer is the top way to add revenue to a rental property, according to one report.
  • Baby, you can park your car: Tenants will pay more to park in a garage, or to have a reserved parking space. (They also covet the extra storage space a garage can provide.)
  • Uncommon Common Areas: Older buildings in New York City have found that in order to keep up with their shiny, new counterparts, they have had to add amenities like exercise rooms, rooftop decks and children’s playrooms.
  • Greenery can make a place feel fresh and new. Some new landscaping outside the building, or adding plants to lobbies, offices, and apartment balconies can breathe new life into a space.
  • Common areas can be created and outfitted on even the very lowest budget, and the sense of camaraderie that comes with communal living areas and activities like a game night can make a big impact on the building’s value to a tenant.

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