Buying a property with value-added potential is a perennial favorite for multifamily investors. Beyond the obvious steps of upgrading the clubhouse and renovating units with new kitchen appliances and countertops, what are some not-so-obvious ways to add value to an apartment building?
Amenities for Fitness, Wellness
Some apartment amenities fetch a higher rent than others. The most popular amenity residents are willing to pay extra for is fitness and wellness, the National Apartment Association has found. Some 46 percent of renters will pay higher rents in a building that has a fitness center with classes. Having a small windowless space with a few pieces of outdated equipment won't cut it, however. To be able to attract tenants and charge a premium in rent, the fitness center should have the following four components:
- A professional design that uses the space in the most efficient and attractive way.
- Dedicated space to reflect workout trends, such as separate areas for cycling, yoga and weight training.
- Top-of-the-line equipment with brand names that users will recognize. Hello, Peloton!
- Indoor-outdoor features, or at least natural light with pleasant views.
Before you invest in a state-of-the-art fitness center for your building, consider your location. Renters in Boston, Chicago, Miami and New York City, for example, are willing to pay higher rent premiums for a fitness center than those in Denver and Seattle, where people enjoy easy access to the great outdoors.
Median cost to add a fitness center: $28,500
Average rent premium per month: $66.94 in Boston/$10.57 in Denver
People love their pets—and will often pay a premium for the privilege of being allowed to keep them in their rental unit. Of those multifamily dwellings that allow pets, having pet-friendly amenities often seals the deal for attracting renters and is the number one reason pet owners will pay more for the unit.
Some 68 percent of households own a pet, and 60 percent own the often social and outdoor-lovingvariety: dogs. Pet zones give apartment dwellers places to go with their pooch, creating a sense of community and providing a necessary outlet for apartment-dwelling canines.
Putting in a pet-friendly zone, such as a dog park or a dog-washing station, is one of the least expensive amenities to add, yet, one of the most financially rewarding for an investor. Investors who really want to shine in this area can add a complete pet spa, including grooming, boarding, day care, and training services.
Median price to add a pet-friendly zone: $7,000
Increased pet fees: between $250 to $500 nonrefundable deposit or pet rent of $25 to $50 per month
Co-Working From Home
With 43 percent of the population working from home at least some of the time, a business center ranks just below a fitness center among top-rated amenities. Working remotely is a trend that continues to grow, but the biggest problem these workers face is loneliness. Co-working spaces offer a gathering place for those who prefer interaction while working, an especially important feature in multifamily buildings in urban areas with a young demographic.
Co-working spaces might not boost rents as much as some amenities, but they can lead to more lease renewals. Landlords might want to consider partnering with an existing co-working space or coffee shop and earn extra revenue, through rent or user fees (with residents-only discounts or upgrades).
Unlike fitness centers, business centers don't need to take up prime real estate in a building, either. Workers can be just as productive in a space with no windows, such as a large storage room or basement, as long as the space is well lit and designed for that purpose.
Median price to add a business center: $13,500
Potential ROI: This concept is so new, there is no available data, but if Softbank's multi-billion-dollar investment in co-working giant WeWork is any indication, the trend is here to stay.