Multifamily Value Add: Interior Upgrades

As part of a multifamily value add strategy, pretty much any approach is gonna include some sort of interior upgrades, and there are some fairly common interior upgrades depending on the sub market and the market that you’re in, and what the current rents are, and what you think you can get rents to be after improvement. You might change out the appliances, going from a white appliance to a black, or even a stainless. You’re likely gonna resurface countertops in the kitchens, in the bathrooms. Maybe you even got the opportunity to go in with some sort of a granite countertop, if the market supports it. Most the projects that we do, in a B and C class apartment space, 1970s and ’80s construction really don’t support going in with granite, but sometimes they do and if the ROI’s there to do that can be a good upgrade. Easy upgrade is fixtures, fans, doorknobs, even cabinet pulls are an easy way to make an impact. Obviously, you’re gonna go in with paint, and then vinyl plank flooring is a huge advantage because it looks good, looks like wood. It’s easy to replace sections of it if you need to, and it doesn’t … It’s not gonna see a wear and tear that carpet’s gonna see. So, that vinyl plank with a new coat of paint, some new fixtures can just have a massive impact. Depending on the age of the property, you might also wanna do plugs and switches and give it that nice pop, and have new outlets and light switches throughout. You also might wanna reface the cabinets. So, you might not have to replace the entire cabinet box but you can make them look really brand new by just taking new cabinet fronts and putting those on there with some nice hardware, and that can have a really big impact. Some higher end upgrades might include USB outlets, if you wanna have some sort of a tech package. Potentially, an automated thermostat, like a Nest. You might also do back splashes in the kitchen for a higher end look. Again, it’s all back to what the market or the sub market will support, and what people wanna see, and what people are willing to pay for and that will determine that. But, your interior upgrades on a value add strategy are gonna be a big, big driver of where you think you can take that property, in terms of its financial performance. And since we’re doing syndications, it’s all about the investor return. So, we’ve projected X to our investors. Through making some strategic upgrades, are we able to exceed from proforma expectations that we’ve given to our investors? So, it’s definitely a balancing act when you’ve got a budget to start with and you’re trying to maximize your ROI and create a win-win situation where your residents are getting the product that they want and they’re willing to pay for it, and your investors are getting the returns that were promised to them by the sponsor. So, interior upgrades, a couple of things you can do in there to go ahead and do that. We’re see interior upgrades anywhere from 3000 to 6000, 7000 dollars, depending on how bad the property was when we initially took it over. Material and labor costs have gone up recently, but that’s just part of the reality of being in business. So, rents have gone up as well and it’s a balancing act that the sponsor’s gotta keep in mind when they’re adding value to this property. But, pretty much any value add strategy is gonna include some sort of interior upgrade component. When we see a property that hasn’t been touched in 20 years, and it’s got outdated components, that’s a great opportunity to go in, invest a little bit in that unit and then see that back over time with an increase in income. So, have a great day.