Multifamily investor · Boston, MA · Member since 2017 · 281 posts · 521 votes
I posted about this a month or so ago, but we've continued to have results that have surprised even me. If you're struggling with adapting a value-add strategy to your properties, I highly recommend you take a new approach that has been very successful for us.
There are many challenges to getting rent increases during a pandemic, but with some hard work and an innovative value-add strategy it’s quite possible. Pre-COVID-19, sponsors were able to increase rents as new tenants come on board by renovating the units. Don’t assume that due to COVID-19 people won’t want to pay a premium for an upgraded unit. We developed a “renovate on demand” strategy that gave our tenants a choice between renting an upgraded unit at a premium or a “classic unit,” and almost 70% opted for the renovated one at a higher rent. Analyze the data to be sure you’re in a strong market, because tenants in a strong market are more willing to pay for a nicer apartment. Finally, remember that by renovating units you’re not only increasing your monthly income, you’re also increasing the value of the property when it comes time to sell.
@Ellie Perlman Thanks for sharing this. For clarification, did you survey current tenants about upgrading the units that they were living in or prospective tenants who were considering renting a unit from you?
@Ellie Perlman. Great job! We did the same thing on three units that had vacancies in May and June. Some cosmetic upgrades, and higher rents. I even raised rent on an existing tenant. I know, I'm terrible and it can't be done! Ha ha. The existing tenant did ask why rents were going up, which is a reasonable question. I explained the market, the higher costs I have absorbed, and how my identical units were being rented at an even higher rate to new tenants. They appreciated the explanation, and signed the lease addendum.