First, Three Assumptions:

 

I will make a couple of assumptions here before we talk about where to focus your Value Adding energy.
 
1) You bought this Property at the right price ... so that it cash flows immediately after you take possession. Remember this can only happen if you bought on Actual Numbers.

2) You have a pool of dedicated rehab money and a capital improvement budget. You have included these numbers in your proformas and budget and the money for structural repairs - and more - actually exists.

3) You know and have addressed the structural issues in the buildings. Structural integrity and Tenant safety are our first concerns.
 

So you are cash flowing and the buildings are safe and sound AND you have some money left over to Add Value to the Property. Where is the elusive "Biggest Bang"?
 

In order to understand the answer ... you have to think like a Tenant ... here's why ... Long-term, stable, high quality Tenants are one of the biggest contributors to a high and stable NOI. Anything you do that increases Tenant Quality and increases Tenant Retention will drop dollars right to your bottom line.
 

Remember too that Tenants are the ones that actually live in your buildings. You drive by and occasionally drive through, spending some time in the rental office. The Tenants spend hundreds of hours a week here. So the drive-by appearance of the property is actually NOT as important as the actual experience of living in the facility.
 
I have interviewed Property Managers with decades of Commercial Property experience with hundreds of properties of all Asset Types ... and here are their Top Ten Multifamily Value Add improvements. Think about the Tenant Experience and they will make sense.

1) Interior Landscaping: Filling in the bare areas INSIDE the complex
2) Striping and sealing Parking Lots
3) Landscaping around the Pool 
4) Wood repair and painting - interior
5) Two tone paint in the units
6) Retexture walls
7) Crown molding
8) Ceiling fans
9) Computerized thermostats
10) Upgraded lighting packages with new, matching, more modern fixtures
 

 

Just remember to avoid the #1 Mistake in Value Add Investing ...

Over-Improving the Property.

 

Remember that not all improvements Add Value ... not all improvements will drive the NOI up. In this example ... if you do anything that does not directly result in Higher Quality Tenants and/or Lower Tenant Turnover - you are not Adding Value.
 
Always make sure you know the standard of appearance and amenities for your Asset Type and Class ... and don't spend money on improvements that don't add to your NOI. 

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Example:
A marble, floor-to-ceiling Zen fountain in the lobby of the rental office in a 150 unit "C" Class apartment complex - built in the seventies - is definitely overkill. The kind of Tenant who would only rent in a "Zen fountain enhanced" complex is not the kind of tenant who lives in a building constructed in the 70's. That is a "purdy" Property improvement that did NOT Add Value.
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Make the improvements that put your Property in the top tier of its class ... and stop right there.
 
There's your biggest Multifamily bang for the Buck.

 

Take a moment to think about your Property ... what improvements could you make that would improve your Tenant's experience and not Over Improve the Buildings?

 

 

Here's to your investing success.