Capex To Raise Rents

[Tony Blaine]

In your experience for those who have at least done a couple CapEx Multi family investments, what has been your primary focal point when evaluating what to improve on a property to increase rents? Do you look at exterior or interior first? What interior improvements do you look for first to upgrade? Infrastructure, Kitchens, bathrooms?

What exterior improvements on a multi family does your eyes focus on when visiting a potential investment? Ext paint, roofing, pool area, landscaping, pavement, etc?

I understand this could depend on your area and target clientele, but would love to hear opinions from those valuable BP members who have a history of experience in this field.

[Account Closed]

Misunderstanding of CapEx. CapEx is to maintain or restore the original quality and nature of the property.

What you are talking about is Capital Improvements - so assuming that your property has no deferred maintenance or life/safety issues, then the best way to determine what improvements to make is to go visit and tour the property that has the highest rent in your market and compare that to your. I not saying to go look at comparable properties but those in your market that have the highest rent. 

Based on your findings, you can then set a budget. For example, if the best rents are say $100 a month more than your property, then if you did everything that the best property has, you could expect something close to $100 rent increase. Based on your financial situation, you can then decide how to spend your money.

Lastly, driving rents is an ongoing process and you should be always working on that with each lease turnover or renewal. But if your intent is to sell the property sooner than later, remember that income property is based on revenue. Consider the following: 

Installing a ceiling fan may cost you $200.00 and you may only get $10 a month more in rent. After one year, you still have not recovered your cost so you might decide that the improvement is not worth doing. HOWEVER, if you are selling the property, that additional $10 a month is equal to $120 a year in additional income. On a 10% capitalization rate, thats equals $1,200 additional value. I think most people would happily spend $200 to get $1,200.