Creating Value: Renovation Strategies for Multifamily Rental Properties

Multifamily rentals are an attractive investment for a good number of reasons. Aside from their monthly income potential, multifamily properties are very stable investments that tend to grow in value over time. They can also offer many tax benefits to investors. To further increase your returns on multifamily investments, you may want to consider renovating the property. Enhancing your property is the best way to appeal to potential renters, and can help you attract quality tenants that will stay at your property long-term. In this piece, we cover some of the top renovation strategies for multifamily rental properties so you can maximize your return on investment.

Identifying Renovation Opportunities

Before you start making renovations to one of your properties, it helps to strategize a bit so you can get the most value out of your work. There are certain areas of a home where making improvements will have a massive impact, and others that are less important. For the interior, you will want to focus on high traffic areas like the kitchen, living room, and bathrooms. Also, paying attention to your property’s exterior helps boost curb appeal, which can leave a lasting impression on potential renters. The renovations you make to these places will add significant value to the property while costing you relatively little.

The best time to actually perform these renovations is whenever there’s a vacancy in a rental unit. It’s a lot harder to make renovations to a unit that’s already occupied, and you will likely need some time to conduct a proper search and tenant screening process anyways. Vacancies make for the perfect opportunity to do some rehab while having a minimal impact on your rental income. Note that it helps to have an understanding of the broader market your property is located in, and the audience you want to appeal to. You don’t want to over-improve the property to the point where you price out all your potential tenants.

Cost-Effective Renovation Strategies

When you have so many options to choose from, it can be difficult to determine what type of renovations you should perform. Your best bet is to focus on cost-effective improvements first, ideally in high traffic areas, which will help to add significant value to your investment. Here are the three categories of renovation you should pay attention to:

1: Cosmetic Upgrades

Let’s start with renovations for your property’s appearance. Your goal should be to make quick and easy updates that make a big difference in the look and feel of a home. We already mentioned how exterior upgrades play a large role in first impressions. Some great, cost-effective options include a fresh coat of paint, new siding, and paying special attention to landscaping. For the interior, updating flooring and replacing outdated fixtures is a good start, but you should really try to keep your renovations contained to more high-traffic areas. A fresh coat of paint in each room can go a long way here too.

2: Energy-Efficient Improvements

Another easy way to maximize your multifamily investment’s return is through energy-efficient upgrades. Replacing lighting, appliances, and older windows and insulation helps reduce monthly costs. These updates can even become selling points when you are trying to fill vacancies. Not only do they appeal to an eco-minded audience, but they can also add significant value to your property while saving you money on utilities.

3: Amenity Enhancements

Updating the amenities on your property is not as much of a priority as other areas, but it can quickly become one if the competition in your market offers better features. You at least want to match the level of amenities offered by competitors, but if you really want to stand out you do have a few options. Making updates to common areas, like a community garden, gives your tenants more places they can enjoy and spend time at, and it can be a cost-effective update too. For more premium features, consider adding a fitness center for tenants, or pet friendly areas/units. However, you want to make sure that you’re adding features that will truly provide value to tenants, otherwise it can be hard to justify the price hike that comes with them.

Tips for Maximizing Your ROI

Renovations can be costly, which is why it’s so important to pay attention to planning and monitoring the progress of work. Before you start making any renovations, you should take time to plan each step of the process in detail. You will also want to get an accurate estimate of costs and how much value your renovations will add. This will help you prioritize projects that net better returns and avoid bad upgrades. You’ll also want to make sure that you’re monitoring the progress of the work, including your timeline for signs of any delays. Since time is money, getting your renovations completed on schedule should be a high priority.

Finally, if you are having trouble securing financing for your renovation projects, know that you have a number of options available to you. Aside from financing offered by traditional lenders like banks, there are private loans offered by companies that operate in the real estate industry. The best part is that many of them offer financing programs designed for renovation projects. These loans have shorter timelines and more customizable terms, along with a less stringent application process, which can be a significant advantage for investors.

RCN Capital

The easiest way to save on rental property financing is to find a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Are you looking to perform renovations on your investment property?