Things worth the ROI in a fourplex?

[Account Closed]

What are the best things to force appreciation in small multi families? Also, I plan to owner occupy the fourplex I’m under contract for. I want to make several changes strictly for my enjoyment while I live there. But I don’t know if they’ll justify increased rents. Mainly: - new appliances - privacy fence - new floors - conversion from 0.5 bath to full bath - new doors and trim I don’t know what’s too far and I guess it’ll depend on the market in my area. But is there anything creative or note worthy you’ve done to stand out or increase the value of your small multi family? Thank you!

[Jack P.]

It's important to remember that 4-plex valuations are treated the same as single family homes...that is based on comps.  Any improvements you make need to have a comp available to compare it against.  If none exist, then it'll be hard for the appraiser to come up with a good number, and my just be pulling it out of his/her rear end.  

That being said, it's really just aesthetics unless you want to make significant upgrades.  The same rules of thumb apply there for adding value as do for SFRs.  For example, you'll only get about 70% back on what you put into a kitchen remodel.  

However, you can look at it from a different perspective as an income property.  If you spend $10k on a kitchen remodel, you may be able to command an extra $100/month, and it'll reduce your vacancy to 3%.  Using the same rule of thumb above, you'll need much less time to recoup your investment ($3k vs. $10k) before you list the place for sale.  

But, anyone looking to buy a 4-plex is concerned about one thing: ROI. Educated buyers are only going to purchase a property that can produce a decent return, and that means total revenue minus total costs. You can make all the improvements you like, but if they don't increase the net revenue, then they aren't worth the investment.

Bottom line, I only make improvements that meet my investment goals for those properties.  It's more complicated than a single variable complication.

So, to answer your question, knock yourself out with sweat equity and amenities in the unit you're occupying.  I'd definitely go with stainless appliances.  In my experience, that's the best selling point, and more than make up for the cost in reduced vacancy.  Be patient with the other units, and only update them after normal turnover.