Create Your Own Appreciation: 21 Ways to Increase the Value of Your Rental Property

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Sometimes increasing the value of an investment property it’s easier than we think and it doesn’t always involve expensive rehab.

Here is an example:

Let’s say you own an eight-unit apartment building located in Florida. This property brings a net operating income of $ 105 600. The cap rate is 8 percent.

Using this formula,

Property Value = NOI÷Cap Rate,

I calculate that the current value of this property is $1,320,000.

What if I can increase the Net Operating Income (NOI) by $35,000. This will add $437,500 to the value of this rental instantly.

$35,000 translates into $365 per month per unit.

So how can you increase the Net Operating Income?

Let’s look at how NOI is calculated.

Net Operating Income (NOI) = RR (Real Estate Revenue) – Operating Expenses (OP)

To increase the Net Operating Income you can either increase the revenue or decrease the operating expenses.

Here are 21 ways you can increase the NOI:

1. Research your customers (tenants)

What are their preferences? Maybe 60% want to get pets and you don’t allow any pets.
What if you can charge pet fees and pet-related move-out fees.
$50 pet monthly pet rent on an eight-unit building can add $200-$300 extra per month.
$3,600 per year and increase the value of your building by $45,000.

2. Identify problems with the building

Identify problems with the building. If you are in the process of buying an investment property talk with the tenants to identify problems with the building. Are those problems economically unsolvable or are they hidden opportunities?
An example of an easily solvable problem is a lack of security.

3. Let go of problem tenants

Research problems with the tenants, disruptive tenants can increase the vacancy rate and the turnover cost.
Even if you have an excellent building, bad tenants can ruin it for everyone and can also increase the operating costs.

4. Change market rent

Are you collecting market rents? You will be surprised what not charging market rents may be costing you. If you underprice your rent by $100, on an 8-unit building, that’s $9,600 per year and a reduction of $120,000 of the property value (if the cap rate is 8%)

5. Update your rentals

Is your property neural and boring? The easiest and cheapest makeover is paint. If you don’t know where to start, check out Houzz.com and Pinterest.

6. Improve the view and privacy

Sometimes simple fencing and landscaping can improve the privacy and the view.

7. Condition and cleanliness

This is a pet peeve of mine because I see so many landlords who think that it’s fine to show a property without cleaning it professionally. This may be fine when the market is tight but it will lead to higher vacancy rates when the market change, as it will eventually.

8. Add architectural details

Trims and details like molding, chair railing, shiplap walls, etc. immediately elevate the property and make it look higher end.

9. Improve safety and security

Before buying a building make sure you get it inspected by an environmental expert. Deadbolts, entry-door peepholes, and kickplates are easy ways to improve safety and give tenants a sense of security.

10. Right size rooms

Increase room sizes or add more bedrooms. Famously Barbara Corcoran started her real estate career by advertising a one-bedroom apartment as one bedroom plus den. She did ask the landlord to make a partition. This made her listing stand out, rent faster, and at a higher rent.

11. Add storage

Self-storage is the fastest-growing type of real estate, mostly because we have so much stuff and we move very often. Look for dead space you can utilize as storage, install or build storage units or even storage sheds.

12. Deal with noise

If the noise is coming from the street, installing new soundproof windows may reduce the problem. Fences and shrubs can not only create privacy but also suppress the noise.

13. Improve the curb appeal

Design an enticing entry, clean up the yard, and improve the sidewalks and parking areas. Read our article: Curb Appeal on a Budget to get more tips.

14. Add extra income

Rental income can be supplemented by charging for laundry, parking, storage lockers, and other amenities. For higher-end properties, think about adding services such as cleaning, daycare and transportation. You can increase your revenue while also strengthening your competitive advantage.

15. Covert a garage, an attic, or a basement

The key is quality conversion. If not done correctly, this will actually detract from the value.

16. Create an accessory apartment

Create an in-law suite, garage apartment, or other accessory living units that can add to the rental income

17. Improve the neighborhood

Look for ways to improve the desirability and reputation of the neighborhood: eliminate neighborhood nuisances, improve security, create a neighborhood watch, change the name or join forces with other residents to improve schools.

18. Conduct an energy audit

 If paying for utilities, find a way to reduce your bills. Many utility companies provide energy audits.

19. If possible and economically feasible install separate utility meters

This can run into thousands of dollars so it’s not always worth it.

20. Reduce maintenance and repair costs

This is accomplished best by installing low-maintenance fixtures and materials. This includes the landscaping. Don’t underestimate the importance of good tenant selection. Include a repair clause in your lease, let the tenants pay the first $50 of all repairs. Hire a handyman on call and perform preventative maintenance.

21. Reduce property taxes

Check your tax assessment yearly. Especially in a falling real estate market, tax assessments may be too high. If you can find comparable properties that sold for less, you may have grounds to request a tax reduction.

When you think of your rental property, don’t think rental, think home. Your tenants will stay longer and pay higher rent if you give them something special, that they can’t find elsewhere. This in turn will increase the value of your investment property.

About the author

Jana Christo is a business owner, real estate investor, and property manager. She has 16 years of experience in most areas of real estate.
During the last recession, she was also the managing partner for a company that bought and rehabbed properties from the court foreclosure auctions. Today, she manages her own portfolio of rental properties and shares her experience on Rentce.com.

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