Real estate investing and owning multifamily rental properties is an attractive and profitable investment proposition for investors because it generates consistent cash returns. Deferred maintenance and poor management are the top reasons why an asset can lose market value. However, these factors also create an opportunity for a multifamily real estate syndication team to add value to an asset that will provide investors with higher yields on their investment once the property is stable.
If you own a multifamily asset and want to maximize your investment’s potential, continue reading as we highlight proven strategies that increase the value and returns on a multifamily investment.
1. Aim for Low Vacancy Rates
It is common for real estate investors to underestimate the vacancy rate in a given multifamily property. However, the vacancy rate is a crucial metric for determining the value of multifamily housing.
Generally, a lower vacancy rate indicates a more attractive property and that people actively seek housing in the immediate area. Contrarily, a high vacancy rate is sometimes an indicator that a building is located in an unattractive neighborhood or is otherwise in need of updating or repair – the latter provides a great opportunity to add value and improve the net operating income of a property.
As a multifamily investor, your top priority is a low vacancy percentage; however, when faced with a high percentage of vacancies, applying the following tips can help minimize vacancy rates in your investment properties.
Attract Tenants with Incentives
Giving your tenants a little something extra might make them feel like they’re part of a particular community. Although this may reduce your income in the short term, it can help keep your property full and increase value through lower vacancy rates.
Tenant Vetting
It’s crucial to vet potential tenants and identify good ones. Bad tenants tend to be late with the rent, which might result in eviction and increase vacancy rates. Tenants that get along well with their previous landlords, have impeccable rental histories, and have good credit can bring better value to your multifamily properties.
Keep an Eye on Upcoming Lease Termination Dates
As a multifamily building owner, it is essential that your property manager is keeping an eye on leases. Monitoring tenant leases that expire over the next 3 to 6 months should be prioritized. This timeframe reduces vacancy rates by helping you keep an eye on the current tenant while searching for a new one.
Prioritize Long Term Leases
Lower vacancy rates may be an effect of longer lease terms. Tenants with long-term leases also tend to be the best ones to have, as they often set the groundwork for excellent behavior and lower vacancy rates.
Apply Proper Marketing Strategies
Practical, strategic, and extensive marketing and advertising of unoccupied properties are crucial. Ensure the benefits offered by your investment property are advertised to the type of tenant who will most likely lease the space there. The employment of a proactive real estate agent who is well-versed in both your property type and the local market might be invaluable at this stage.
2.TAKE ADVANTAGE OF MODERN TECHNOLOGY
In today’s rental market, renters younger than 40 account for a sizable share, and according to Pew Research, such renters are prepared to spend extra per month for a property equipped with smart technology. This survey highlights the shift in the type of tenant looking for housing; therefore, even if these tech upgrades are pricey up front, you need to make adjustments to accommodate the needs of tenants.
The following innovative home technologies offer value to multifamily properties because of the increased security and technical complexity they bring to the house.
Smart Lighting
Installing a state-of-the-art lighting system in a house has several potential benefits, including a rise in the property’s market value. Smart lighting, like LEDs, can reduce energy use by as much as 75%. Research shows that tenants are interested in hearing that such lighting systems’ monthly power costs are drastically reduced compared to conventional systems.
Smart lighting may do more for a home than save energy costs. A simple press of a button or voice command can instantly transform the atmosphere, temperature and hue of the home. Also, the lighting system may be used to increase security by making it appear as though someone is home while they are not.
Smart smoke detectors
Most modern dwellings are equipped with smoke alarms and carbon monoxide detectors. Smart detectors have the distinct advantage of alerting homes via mobile or tablet computers. You can save money on insurance by installing them.
High-tech Solar Systems
Many renters are interested in sustainable practices like using renewable energy to reduce their carbon footprint and help the environment. Multifamily buildings can benefit financially and environmentally from installing solar panels and battery storage.
Also, a system that tracks and controls energy usage can be linked to solar panels to maximize building value. This is aided by the highest performance from solar panels and optimal utilization of the generated energy.
The upfront cost is considerable, but the value boost from installing a high-quality solar energy system will be worth it.
Smart Security Systems
The value of your multifamily property will increase if you install this technological upgrade. Smart locks and doorbells, cameras and motion sensors, and alarm systems are just a few components that make up a comprehensive smart home security system.
Smart Moisture Sensor
Installing damp or moisture sensors may prevent expensive water and mold damage and simplify maintenance. Humidity and leaks may have long-term effects that aren’t usually visible initially, leading to expensive repairs down the road. With the use of moisture sensors, you may be notified instantly of any changes that require your attention, preventing any issues from ever manifesting.
3. Leasing at Market Rates
Raising rents is a simple strategy to enhance value. When a landlord does not charge market rates for rent, they incur a loss to lease. In essence, it represents the gap between the unit’s asking price and the rental revenue promised by the lease.
Many structures are in disrepair and are undervalued since they are being leased at below-market rates. So, it’s essential to raise below-market rent rates while keeping an eye out for any rent control legislation that can limit your capacity to increase rent.
4. Employ Easier Methods to Collect Rent
Property value is heavily influenced by how well tenants perform. Renters consistently late in making payments can be an annoyance and result in substantial losses. Improving how rent is collected can help reduce this risk and maintain a steady cash flow.
5. IMPROVE CURB APPEAL
Like any other type of residential property, multifamily properties benefit immensely from an attractive curb appeal. The aesthetics of your building’s outside will either entice prospective renters to learn more and stop to have a look inside or discourage them from doing so and make them drive on by.
Curb appeal for a multifamily property tells prospective tenants they may feel secure there. Owners and managers that take pride in their property show they value their tenants’ satisfaction by maintaining a clean and orderly complex.
KEY TAKEAWAYS
The best way to increase the longevity and value of your multifamily property investment is to address any deferred maintenance and having a professional property management team that will apply value-adding strategies to increase cash flow and reduce long-term costs. Remember that happy tenants equal less vacancies and higher yields for your investors. Cheers and remember, Always Invest Where It Makes Cents!
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