My articles always seem to start out talking about branding, marketing, relationships, etc—the fluffy stuff related to being a great Real Estate investor. It’s my background, and it’s also important. Today, I want to change it up and talk about Creativity.
Wow, big leap, dude.
Specifically, I want to talk about the creative ways we are looking to add value to our apartment investments. After all, we are Value-add buyers. We buy existing, operating, occupied apartments, and we come in and make them perform better. We force appreciation. We renovate. We reduce expenses. We operate for a while. We sell. We make our investors happy, and we repeat the process.
Often times the key to this process is finding creative ways to create value. All our competitors are renovating the unit interiors to drive higher rents. And we take pride in making our leasing centers awesome, inviting places. But where we can really crank up the Net Operating Income (and offer amazing returns to investors) is by adding amenities that create revenue. In this article, I’m going to highlight some of our favorite creative strategies for adding value.
Reserved Parking. This one is pretty simple—offer residents a reserved parking spot outside of their apartment for a fee. Typically, we can get $20/month for a reserved parking spot and it costs virtually nothing to hammer a sign in front of the space marking it reserved. This is also a very flexible profit center: we can sell as many of these spaces as we have residents that are willing to pay for them, and if someone moves out we can simply remove the sign if no one else wants to take the spot.
Covered Parking. Particularly in our Texas markets where it can get really hot, having a covered (and reserved) spot to park your car is a popular option. Market rate is about $40/month for a covered spot. Our cost to install these is a little under $1000/stall and we install them in bays of 4. The payback period is right at 2 years per stall, which makes it a pretty easy win for both residents and our financial statement.
Trash Valet. This is an amenity that really feels like a win-win for our residents, and something that we’re seeing take off in our Class B markets. Every night, residents place their trash right outside their door in a provided trashcan—and a third party comes by to haul their trash away. This company also helps to keep the common areas cleaned up and the overall property looking pristine. The economics are pretty simple (and favorable) as well. We are charged about $12/unit, and we charge this back to our residents at $25. It is a standard amenity added on top of the rent, but a service that most residents find to be indispensable once they get used to it.
Private (Pet) Yards. One of the benefits of living in a home is having a yard. When you live in an apartment, you usually don’t find private yards. We look for first floor units with space to add these yards, and offer these units to residents who value having a private yard–either for their dog, their grill, or just to have some private green space. The going rate is about $90/month for a decent sized (8’ off the existing patio) yard, and it costs less than $1000 to install.
Washer/Dryer. Lets face it—no one likes to go to the Laundromat if they can avoid it. Most people don’t even want to take their laundry across the parking lot. Because of that, adding washer/dryer connections, and the units themselves both add value to the complex. When we walk a property that doesn’t have connections, we are looking to explore how feasible it would be to add them—usually by converting a closet into stackable unit. If they do have connections, we have been starting to rent Washer and Dryers to our residents, if they request one. We rent them out at $40/month and they cost us about $725 for the set.
Technology Amenity Package. “The Smart Home” is a term that picked up a lot of traction in the last couple years. We’ve found a creative way to monetize this, when residents want to have a smart apartment. For $45/month, we will install a Nest Thermostat, a Bluetooth activated front door lock, USB electrical outlets and Connected Light switches in the kitchen and living room. Not everyone is looking for these touches, but for those that are, the ROI is really good and it gives their home a tech-forward feel that meets their desires. It also helps with property marketing, as we can highlight these high-end upgrades.
We don’t implement all of these strategies on all of our deals, but where they make sense we try to incorporate them. The more creative and unique, the better. What is your favorite strategy?