Threefold Capital LLC buys multifamily complexes for value and cash flow.
When looking to purchase a multifamily complex we look for ways to increase revenue and decrease expenses.
Underwriting a property to purchase we look at several factors to do this.
Below is a list of value-add opportunities that will increase revenue and decrease expenses:
- Adding more units
In a recent purchase a property had an in house property management company with an office. At threefold we use third party property management that has an office off site of the property. This allowed us to take the office furniture out, add in a bathroom, kitchen and living area. Doing this allowed us to add an additional $595/month in rent and utilities. We decreased the utility expenses by not having the unit used by property management.
- Property Management
Having property management who is responsive to tenants goes a long way. With multifamily units, management is the face of ownership. When a resident has an issue they are contacting your management company. Having someone to respond timely and resolving a problem increases resident satisfaction which leads them to stay longer.
Leasing the units and knowing the rental market in your area is a major factor we look for. Underperforming management is not maximizing the rent. You could be missing out on hundreds or even thousands of dollars a month by not leasing your units quickly and/or at market rent.
A good property management company will have several contractors that can turn units quickly. This will decrease the time your unit sits vacant and to get a tenant back in to keep producing a rental income.
- Laundry
Installing pay-per-use laundry equipment is a hidden gem in the multifamily space. Laundry equipment now can be purchased to accept coins, credit cards, debit cards, or even laundry-specific money cards that can be loaded with cash on-site. Not only does this generate more money for the property, but it also engenders loyalty to the property and the management who are taking care of the needs of the tenants.
- Pets
Allowing pets and accommodating to them is a great way to drive additional income. I have a dog and want the best for him. To pay a pet deposit of $250 and $25/month is a small fee to have my best friend to live with me. A dedicated pet area for daily droppings, playing fetch, or socializing is greatly appreciated by pet-owning and non-pet-owning tenants alike. These types of value-adds also cut down on the nastiness that can be discovered when a tenant exits the unit if those things are not provided.
- Storage
What do most people hate most? Clutter… To have an extra closet or garage to store all the “extras’ is a value add to most people. To pay an extra $100/month is a minimal fee to enjoy the luxury to store those holiday decorations, bike, etc. If charged correctly this could add tremendous revenue and value to your building.
- Utility Bill Back
Water, heat, trash and A/C are all costs that can be billed back to the tenant. In a recent purchase we were able to bill back the water to the tenants which saved us $27,000 per year in expenses. When tenants don’t have to pay for a utility they don’t care how much they use because they are not paying! The usage of these utilities gets very high. When billing back the utility to the resident they are conscious of how much they are using and reduces the expense to you!
- Internet & Cable Bundle
How much do you pay per month on internet and cable services? $150/month? After the promotional price goes away the price increases significantly. Cable and internet providers offer bulk deals to multifamily complexes for a reduced price. Most will charge you $45-$50 per unit and you can charge $89-$99/month. You save the tenant money and you have an additional revenue source!
- Property Updates
Updating common area, landscaping, lighting, entry and painting can add significant value to your building. When you start raising the rents to get them up to market and put some of that back into the building tenants stay longer. They know the rent increases help pay for the updates you’re doing around the building.
