Getting Market rent for an average apartment?

Question

Hello,My husband and I are new landlords, just bought our first in October. We are located in Newark, NJ in an area where a 3 bedroom goes for 1300-1800 and a 2 bed goes for 700-1100 ish. When we bought the place, the tenants were paying $700 for the 3 bed and 550 for the 2 bed (I know). When we moved in, we gave them 60 days notice that the rent would be 1,100 and 900, both way below market, as described above. They can't really afford the rent, and now want to leave, which is fine. We want to get the most out of the apartment (really only enough to cover expenses, we're not greedy), but we did a very nice renovation on our apartment (first floor. we are owner occupiers) and don't want to spend too much money on getting the apartments ready for new tenants. Does anyone have any advice on how we can try to get as close to market rent as possible with only a small investment of maybe 5-7k? Both tenants are extremely clean and haven't damaged the apartments, but the apartments demanding top dollar in the area appear to be completely renovated, which isn't something we can do.My thoughts were:1. Fresh paint.2. Recess lighting.3. replace kitchen cabs.Anything helps!Thanks

Omar Khan · Answer

@Amanda Lee I agree with @Bryan O. comment. What you do will be determined by the condition of the units, neighborhood and the type of tenant you are looking to attract. For instance, in a Class B type property/neighborhood, you will be adding diff. types of touches as compared to the ones found in Class C/D. In Class B, people tend to notice the kitchen, bathroom and light fixtures. As Bryan said, in C/C+ areas people seem to notice flooring/paint (it's assumed these things will be good in Class B/B+) followed by the other items. In your particular case, you shouldn't try to create something for yourself. Instead, you have to look at the offerings in your neighborhood. You don't want a situation where you "over-design" your unit (spend more money than needed) and still get paid market or lower rent. As with all things, it will be a balance between over and under design/spending. Have you tried touring neighborhood properties (physical and online) to get a better idea of what's out there?

Cara Lonsdale · Answer

Forget about the recessed lighting. Paint for sure. There are many things that can spruce up a place without totally renovating it. Consider new light fixtures (but don't spend the money to convert to recessed), door hardware, and ceiling fans (if applicable). New faucets also add to a more updated look and don't have to cost alot.Also, consider new appliances if the budget allows.

Juan Vargas · Answer

Apart from paint and flooring, I would focus mostly on the kitchen and bathrooms. You can refinish the kitchen cabinets and refinish/ replace (if necessary) the countertops. Upgrading the appliances will definitely help. Ultimately you’d need to see what the other units that demand top market rents have as far as renovations and come close to them.

Carlos Pelegrina · Answer

Paint for sure, don't use strong colors just some off white for walls and white for molding and doors.Not sure how big is the apartment, refinish wood floors id you have or install engineered wood or bamboo flooring, there are some good looking cheap options (check build direct)But bathrooms and kitchens make the big difference, if you are doing the renovation yourself, check with IKEA kitchens, you can get some nice cabinets what will give a fresh look for not much money.. also you could just replace the wall cabinets if the base ones are decent and could be refurbuished The counters are tricky because big money require quartzite counter tops that are pretty expensive, but there are some OK options. Use subway tile in backslash that are pretty generic and cheap In the bathrooms new tile can help, and there are some vanity lines like Fresca that are cheap and really good looking.Good luck with the renovation

Ray Reed · Answer

backsplash in the kitchen if possible.

Gino Barbaro · Answer

@Amanda LeeHi Amandayou need to drill down how much the apartment market rate is. 1300-1800 means you don't have a grasp on what rates should be,and if you market too high, you may be vacant for a bit. Go on rentometer and apartments.com to get comps, and ask brokers what their analysis is.There is no way a tenant paying 700 for the 3 beds will be able to afford 1500 rate. One thing they will quickly realize is that they had a terrific deals.Please be careful and do not confuse greed with making money. You need to look areal estate as a business, and it is all about the numbers. The human element is that you are providing a safe, clean affordable apartment for the ability to earn money. Gino

Ray Reed · Answer

@Amanda Lee why are you calling it an area where gentrification is happening? I have been hearing this for 15 years and personally i have not seen any change except for new houses and buildings.. this is not the same thing that happened to Brooklyn and Harlem.

Omar Khan · Answer

@Amanda Lee Assuming your market is not ultra-hot and does not have super-low vacancy, then, in most circumstances, in order to charge market rents, your units will have to be at or around the quality of the average unit at the price point you're charging. Upper or middle-class tastes are very subjective and differ from region to region. Unless you are offering something unique (and marketing that can be a hassle), it's hard to stand out for the right reasons (but easy to stand out for the wrong ones).E.g. You are charging $1500/2bd but your competitors are charging $1450/2bd complete with en-suite washer and dryer. It will make it harder for your unit to quickly be rented at the $1500 price because your competitor is offering something extra (assuming both 2bd are exactly the same). With Zillow, Trulia, etc, it is becoming easier for renters to compare diff. units before even stepping on the property. Where you can stand out is by providing better customer service. For instance, your competitor might show the property in unkempt clothes or talk in a gruff manner, whereas you are professional. Or, you tend to your tenants complaints in a timely manner and follow up with them. A lot of these are "soft"/qualitative points that are hard to exactly define. I would also keep a lookout for online reviews. They can make or break you! Many times, I have toured an apartment/building which had horrible reviews but was amazing IRL or vice-versa. It's hard to escape a certain perception if your online reviews aren't up to par.

Amanda Lee · Answer

That last suggestion is exactly what my husband and I plan on doing - going to check out other units in the area. Here's a counter-question, What do I do in a gentrifying area, where I want to please both the middle class and "working class" (not sure what term to use here, regardless I'm open to any paying, responsible tenant) but other apartments in the area aren't catering to that middle class taste?

Amanda Lee · Answer

@Bryan O. it's a c-d becoming a c-b neighborhood. It's hard to tell what they want, because I'm from an upper-middle class area and have moved to a gentrifying area. I renovated my unit to reflect a millennial, modern taste, and everyone who has seen my apartment really loves it. I just figured taking bits from my renovation that made the biggest difference, one being recessed lighting and updated kitchen really made all the difference. Flooring isn't an issue because it's 80% hardwood, The grout in the kitchen and baths could use a scrub though. One of my biggest issues is not seeing myself living in this space. I'm trying to make it palatable for me but it just doesn't have to be, but from my perspective, if I would pay 1500 for rent, it would have to be nice. I will definitely take your suggestions into serious considerations.