Although there are many moving parts to apartment rehabbing, I have found through the years, common things that lead to great success. I follow these and implement them wherever I go. Here they are.
Five keys to successful apartment property rehabbing:
- Key #1: Make physical and cosmetic improvements to the property
- Key #2: You are in the construction business, so be good at it
- Key #3: Be in a strong location and know your market very, very well
- Key #4: Focus on the net operating income and know your cash position at all times
- Key #5: Have more than one razor-sharp exit strategy and be flexible to market changes
These 5 keys are simple to understand yet are very expansive in content. Read on.
Key #1: Make physical and cosmetic improvements to the property
Before I began rehabbing properties, I asked a highly experienced rehabber, “what’s the most important thing to do to make my rehab work?” He told me without hesitating, “curb appeal is number one. You gotta make the property very attractive.” That made sense to me.
The more attractive I made my property, the more people would come look, the more people would rent, and thus, the value went up as well. It also attracted more buyers. First impressions apply in this business and it sets the expectation. Even though apartment rehab investors must focus on the interior and financial too, it sends a “red flag” up when the curb appeal is poor.
Below are some of the most common physical exterior improvements that can enhance the value of your property:
- New exterior paint
- New or re-striped parking lot
- Fresh landscaping
- New signage out front
- New windows and trim
- Remodeled leasing office
- Replace siding and gutters
- New exterior doors
You can also make structural changes that the investor will “add” value to. Some include:
- New roof
- New electrical system
- New HVAC systems
- New plumbing system
Here are interior physical enhancements you can do to increase values:
- New appliances
- New room configuration
- New colors on walls and/or ceiling
- New lighting
- Hardwood floors
- Remodeled kitchen and bathroom
- New carpet
- New window treatments
The biggest reason why rehabs fail to complete is because too much was spent on interior improvements and money ran out. My advice is to improve the property “good enough only” for the market. It’s a waste of money to “over-do” improvements. Don’t install a $150 light fixture if a $27 one meets the same goal.
For the next couple of weeks, I will post keys #2 through 5 in upcoming blogs. I just don’t have enough room here, sorry. Key #2 is ultra-important and one of the main reason why so many apartment rehabbers fail. But of you follow all 5 keys, you will give yourself the best chance at success than if you didn’t have a game plan.
Don’t try and reinvent the wheel – learn from someone who already has the scars for you! See ya later!