When a local multifamily community was feeling the pressure of Denver's highly competitive rental market, they turned to Stonebridge Builders for help. They needed to consider upgrades not only to address deferred maintenance issues and outdated amenities, but also to justify rent increases to be consistent with local demand. In densely populated urban areas with many options for apartment living, property owners need to set themselves apart from the competition. For many, this means rehabilitation projects to bring value where others don't. By industry standards, a successful renovation project should generate rent increases between 10-30%from interior improvements, and renovations to kitchens and baths tend to generate the greatest ROI.
A great example of this strategy is Home Properties, headquartered in Rochester, NY. The company owns over 43,000 units in 121 properties primarily located in the Mid-Atlantic and Northeast. The company strategy is to acquire assets that most other developers would not be interested in. They're not looking for the newest, most attractive or luxury communities. The assets they acquire are in need of rehabilitation. The company knows that by rehabbing and renovating properties that are "a little beaten up and a little run-down" they can achieve substantial rent increases, which ultimately drives revenue. This strategy has yielded an 11.4 percent average annual total return over the past 10 years, and a 5- year compounded return of 11.7 percent.
Deferred maintenance is certainly an area of focus in multifamily renovation, however the most significant investments are made in upgrading kitchens and baths. In Denver, Stonebridge Builders helped the local company to exercise this strategy and achieve the same results. Kitchens were upgraded with updated cabinetry and counter tops, state of the art appliances and both pendant and recessed lighting to create a brighter look and feel. Baths were also remodeled with upgraded materials and lighting, which justified rent increases, encouraged retention and decreased vacancies.
If your multifamily property could use a little TLC, and you're considering a value-add project, look to Stonebridge Builders for a consultation and ultimately for a seamless and successful process.