Unique Multi-Family Value-Add

Hi guys,

What are some unique value-add strategies you've implemented in your multi-family assets? I am talking beyond the typical lipstick on a pig upgrades. Some things I've experimented with lately are minor technology upgrades such as Nest thermostats, built-in wall USB plugs, and digital locks. Typical cost of an upgrade like this is $500 and will get a $30/month premium (72% YOC).

Also interested in hearing about any unique common-area value-add people are doing.

 

Nest isn't exactly a minor upgrade, but USB outlets are pretty standard in new construction so that's a good one. Digital locks have given me more issues than they're worth, so if you have a good company let me know.

Package concierge is huge. Not sure if you really get a premium for it but it makes the leasing staff happy.

Honestly though, upgrading kitchens and baths is the standard because it works and people care about them.

Commercial Real Estate Developer
 
Best Response

People still care way more about in-unit washers/dryers and dishwashers than a lot of the other "cool" upgrades being built into new product. A certain cohort of tenants won't bat an eye at paying an additional $200/month in rent for an in-unit washer and dryer.

Something that worked well for us on a recent acquisition was installing under-sink dishwashers for 1 bedroom and studio units where kitchen space was at a premium. These are about half the size of a normal dishwasher but hold ~75% of a full-size unit.

 

Agree with the packaged washer dryers. A few more that I think are differentiators: --mini undercounter wine fridges --sonos built in speakers (maybe on premium units only if you're on a tight budget) --second the schlage digital locks, love not having to take keys with me when leaving the house and not driving --adjustable closet shelving/rack system that lets the tenant customize their closet as opposed to being stuck with a fixed rod --showerhead wireless blue tooth speaker insert for an incredible wake up

 

Can't comment on pricing as I am only echoing my current living experience and have found the amenities to be a pleasant surprise. Bluetooth speaker is certainly on the landlord and the showerhead itself is designed for it to pop into. Labor would be nothing over installing a standard showerhead.

I can't imagine the wine fridge is a big difference assuming you already run electrical stub outs to your island millwork--you save on not providing cabinetry/shelving where the wine fridge goes and it sits on the floor just like a dishwasher.

Of all the items, the Sonos is certainly the most expensive but probably the coolest. You have an instantly house party/cocktail hour/dinner party at the palm of your hand (cellphone) and guests don't have to provide their own surround sound even though most already may have it.

 

I think Nest systems and digital locks are great ideas. USB plug in technology is changing as we speak so I would say install them in a way that retrofitting new inputs won't be a hassle. Nest systems also really improve energy efficiency, so I wonder if that kind of upgrade would make a property eligible for green program financing. Rainfall shower heads I would imagine would be attractive.

Common area amenities I think that get overlooked for apartments but are staples in new student housing developments are game rooms. I have a client that builds game rooms on his conventional deals and the tenants love them. They typically have a bar area, pool table, juke box, pinball machine, stuff like that. In one of them, he built a separate small stadium sized movie theater that sits roughly 15-20 people with a projector screen. Tenants use it like crazy.

 

What you need to keep in mind is what class of multifamily your investing(A,B or C class), and based on that your tenants will have varying demand for the upgrades you are talking about.

Also, from my experience, there are simple things people miss out on e.g. water saving shower heads, green initiative interest rate discounts etc. Unlike other upgrades like fences etc., another advantage of the examples I just mentioned is that you don't have to bet on tenants valuing your upgrades and being able to charge higher rentals.

 
fuzzybox:
from my experience, there are simple things people miss out on e.g. water saving shower heads, green initiative interest rate discounts etc. Unlike other upgrades like fences etc., another advantage of the examples I just mentioned is that you don't have to bet on tenants valuing your upgrades and being able to charge higher rentals.

low flow toilets, water saving shower heads, etc definitely pay for themselves with the green pricing you can get on agency debt. However they do not affect your terminal value, which is what I think OP is getting at.

 

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