The desires, tastes, and must-haves of renters transforms from year to year. Priorities come and go, yet staying up with what modern renters want can be a critical element to achieving or exceeding your multi-family investment’s business plan objectives. Yet what do you do when you are starting with apartments built in a different era, when current priorities were not even a “thing”, known, or a competitive advantage at the time?
To answer this, let’s look at the reported priorities of modern renters from a new massive study by the National Multifamily Housing Council (NMHC) and Kingsley Associates. The results are interesting by themselves, and get even more interesting when we divide out low hanging fruit opportunities for older value-add properties from what may be more difficult or expensive to do in those properties. As a property owner, you do not necessarily need to check the box on everything that every renter wants. Instead, start with what many renters want and then hone those options down to which items are most feasible with highest ROI.
Note that “keeping up with the Joneses” for the latest amenities is not actually needed for all types of properties. Some locations, property types, and demographics do not need many of the upgrades discussed below, or these amenities are low enough priority for those renters that they are not willing to pay extra for these upgrades. In those cases, you must be in touch with what your renter base desires. It may come down to less is more, meaning that fewer bells and whistles for lower rent may be their primary driver, and they are not interested in Class B+ amenities. That is completely fine. In those cases, focus on providing quality homes, great condition and maintenance, responsive management, and perhaps a sense of community. For properties where you want to up-level its positioning in the market, attract more or different tenants, or have a competitive advantage over other nearby properties, read on.
First, I’ll start with the hard stuff. These tend to be expensive, impractical, or low ROI. Nonetheless, be aware that newer properties may have these amenities. They can charge higher rents accordingly, though your cost of acquisition should be lower so that your Class B or C property can still provide better cash on cash returns even with them having lower rents. The first two topics below (layout and windows) were not highlighted as much in the report, so I will add them here for completeness.
- Layout: Chopped up rooms do not appeal as well as modern, more open concept space and flow. Completely reconfiguring internal walls, electrical, lighting, plumbing, etc. can be very cost prohibitive and will likely not provide a good return on your investment. Instead, work with what you have, price accordingly, and add less expensive modernization touches such as updated paint schemes, flooring, appliances, exterior curb appeal, and community amenities.
- Windows: Replacing old aluminum windows with modern vinyl or fiberglass windows will be noticed by some renters and not even register for others. This again depends upon the class of building and type of tenant your property is pursuing. Offering a bit lower rent may be a better ROI than spending a lot on new windows. Basic infrastructure tends to be considered a given by renters and does not usually command a direct relationship to higher rents. A renter does not pay more rent just because you installed an expensive new roof, for instance.
- Central air conditioning: This was a big request for renters in hot climates. However, it is expensive to retrofit. Less desirable in-window or in-wall units are more likely a better ROI unless you are already performing a ma