Renovation projects create better living spaces and amenities for your residents, without the time or cost involved in new construction. With a little research, you can select the renovation projects your residents want most.

Kitchen and bathroom renovations are popular because they appeal to residents and offer a solid return on investment. Upgraded flooring, energy-efficient appliances, LED lighting, and package holding areas also positively impact net operating income (NOI) by lowering expenses or raising rents.

When the competition is tight, details like washers and dryers and soundproofing can heavily influence a resident’s decision. 89% of residents are interested in units with a washer and dryer. 77% of those residents won’t rent a unit that doesn’t have a washer and dryer.² In addition, 53% of residents interested in soundproof walls won’t rent from a property that doesn’t offer them.²

Decrease Turnover
The turnover rate for multifamily housing is around 50%, and it costs up to $3,000 per unit for the turn process.³ High turnover rates equal high costs. In order to sustain profitability, it’s important to retain current residents and lower resident attrition.

For example, residents with pets generally live at a property longer than residents without pets. One way to tap into this loyal market is to add pet-friendly features like dog parks, pet washing stations, and pet-friendly units. Pet-friendly upgrades reduce costly turnover rates and expand the applicant pool to reduce vacancies.

Increase Revenue
Renovations can help increase revenue, which is arguably the most important reason to invest in multifamily renovations. Strategically planned renovations can add value to your property and increase monthly income. Kitchen and bathroom renovations continue to be top revenue producers.

Two other revenue-producing in-unit renovations are hardwood floors and balconies. Residents will pay $75 more per month for hardwood floors and $50 more per month for a balcony.⁴ Added amenities also produce higher rents. 46% of residents will pay more for access to fitness classes, and 42% will pay more for access to walking trails or tracks.4 Focus on renovations that drive rent increases and revenue will follow.

Keep Your Property in Working Order
Structural upgrades not only add value, they also extend the lives of multifamily properties. Maintenance projects like new roofs, mechanical upgrades, improved plumbing, and HVAC upgrades help avoid costly, unexpected repairs and resident inconvenience. For example, a damaged roof can lead to in-unit destruction, which ultimately costs more to repair and frustrates residents. Stay on top of maintenance renovations to keep your property in tip-top shape and prevent unpleasant surprises for residents.

Ensure Resident Convenience
Modern residents expect modern convenience and are willing to pay for it. In fact, 92% of residents say convenience matters.⁵ Invest in renovations that make life easier for your residents. Technology renovations like smart lighting, smart thermostats, and keyless door locks are relatively low in cost, but they can increase rents by $25 per month per unit.⁶

Convenience amenities like on-site fitness centers, business centers, and package holding areas attract residents. Some amenities like covered parking and laundry services even produce additional revenue through service fees. Invest in renovations that build resident goodwill with added convenience.

Invest in Multifamily Renovations Today
Not updating your multifamily property will cost more in the long run as you struggle to attract and retain new residents, compete in an ever-expanding market, and maintain the wear and tear of steadily degrading structures and fixtures. In order to stay competitive, multifamily property owners must keep properties in peak condition by investing in renovations. Renovations add value to a property, thereby lowering turnover rates and increasing revenue. Get it right from the start by investing in multifamily renovations.

Sources:

1. NAAHQ, 2013
2. NMHC, 2017
3. Property Management Insider, 2017
4. NAAHQ, 2017
5. NMHC, 2018
6. NAA, 2017

Renovations need to be successful from the start in order to help your bottom line. A successful apartment renovation requires vision, coordination and planning. Keep your team focused on the end goal throughout the entire process.

Set Goals

Renovations are often driven by necessity, so determine your project’s goals before starting. For example, roof damage requires immediate repair or replacement. However, planned renovations help avoid those unplanned repairs. Don’t wait for a roof cave-in to notice it needs attention. The same goes for other features like outdated appliances and HVAC systems, leaky appliances and broken door locks. Make your property more appealing and stay on top of regular wear and tear with planned renovations.

Renovations can lead to increased property values and higher monthly rents.²They also help you remain competitive and decrease attrition by adding upgrades residents desire. In some cases, renovations are needed to meet new local or state requirements. Know exactly what you aim to accomplish to ensure a positive outcome.

Create a Plan

A solid project plan is key to getting started with renovations. Yours should include the timeframe, scope, materials, budget and other key elements. When developing your plan, time in-unit renovations to turnovers to avoid resident disruption. Also, schedule amenity upgrades at the opportune time for minimal resident inconvenience. For example, don’t plan a swimming pool renovation in the middle of summer. Instead, upgrade the swimming pool during the off-season.

Determine Budget

The budget drives your renovation and is part of the overall project plan. Moderate renovations often produce a higher return on investment (ROI) than major renovations or luxury upgrades.³ A limited budget can still produce a huge impact. For example, pet-friendly amenities are among the most frequently requested features by residents, and they are relatively inexpensive to provide. The same is true of package holding areas and in-unit washers and dryers.²

A budget involves more than just materials and labor. It also includes staff time, lost revenue from vacancies and the impact to current residents. As you create your budget, don’t forget these intangible costs because they can impact your bottom line.

Get Buy-In from All Parties

A project is only as successful as the buy-in from impacted parties. Consider all of the key players, including the property manager, maintenance team, marketing and office teams and residents. Communicate the plan and the timeframe to set realistic expectations. Be honest about the roles each party must play to make the renovations successful.

Renovations mean disruption for your current residents. Even though the renovations may benefit them in the long run, the transition period can be challenging. Share the vision for the property with your residents so they are clear on the benefits. Also, keep the communication lines open to make it easy for residents to voice complaints or concerns. Every issue may not have a smooth resolution, but residents should feel heard. One great way to plan and track communication with residents is an up-to-date resident portal. Proactively promote your renovations and their benefits before, during and after the project for maximum impact.

Renovation Success from the Start

Planning, experienced professionals, accurate budgets and common goals help ensure the success of your renovation project from the start.

Sources:

1. NAAHQ, 2013
2. NAAHQ, 2018
3. Multifamily Executive, 2014

Maximize Rents and Increase Demand

Boost Curb Appeal

The exterior of your property is not only the first impression for potential residents, it’s the first element that welcomes current residents home. Online and onsite, a little curb appeal can go a long way. Enhance your online reputation by posting some great photos and videos of your property and encouraging positive reviews. Outdoors, keep landscaping looking fresh and properly maintain your playgrounds, dog runs, outdoor fitness areas, or picnic areas.

Add Desirable Amenities

Did you know? Adding some irresistible amenities can yield an additional $77 per month in rental income.² Inside the home, consider “smart” technology that can improve energy, efficiency, and security, or premium features like USB receptacles, larger closets and deluxe kitchen and bath fixtures. Outside, more and more residents are requesting preferential parking, pet-friendly spaces, and package solutions.³

Focus on Small but Noticeable Improvements

You don’t need to break your budget on improvements to boost your NOI. Affordable but impactful upgrades like in-unit washers and dryers, updated flooring, new appliances, and better lighting increase resident demand at a higher rental rate. For example, 49% of residents are willing to pay up to $75 more each month for hardwood floors.² Outdoors, adding more common areas for people to mingle is both easy and economical.

Decrease Expenses and Operational Costs

Go “Green”

Whileinstalling smarter lighting and plumbing systems involve a minor initial cost, they can mean big savings in terms of lowering energy costs. Consider making the switch to LED bulbs, which use about 50% less energy than traditional incandescent bulbs. Additionally, they last up to 30 times longer, helping you to save on maintenance costs.⁴ To lower your water bill, install WaterSense fixtures, which are certified to be at least 20% more efficient. Fix leaky plumbing and save up to 10% on your water bill, 10,000 gallons of water, and ten months of laundry water.⁵

Minimize Turnover

Turnovers are one of the most expensive multifamily operational costs to incur, averaging up to $3000 per unit.⁶ Unit turns are inevitable, but with proper planning and procedures, you can streamline your turn process, and shorten vacancy times. This will give you more time to update or upgrade units without inconveniencing residents, which can offset turn costs by increasing your cash flow. Smart tech can cut time spent entering inspections or managing material orders and maintenance requests. A resident portal can help build facilitate resident relationships and communications.

Want to lower attrition? Make your property pet-friendly. Residents with pets live at a property on average 23 months compared to only 15 months with non-pet owning residents. Plus, you can typically charge 20% to 30% more in rental rates for pet friendly communities.⁷

Higher NOI Increases Property Value

Multifamily property owners don’t have to settle for stagnant property values. While appreciation is primarily dependent on factors outside of the property owner’s control, NOI is very much in the control of property owners and property managers.

Sources:

1. NAA, 2016
2. NAAHQ, 2017
3. NAA, 2017
4. US Dept. of Energy, 2017
5. EPA, 2018
6. Property Management Insider, 2017
7. Renters Warehouse, 2017

Understanding the purpose of the project is also key to determining where to prioritize your dollars. For example, installing hardwood floors is one of the top upgrades to increase rents, and they’re a smart investment for multifamily properties.² However, for a limited budget, vinyl plank flooring may be the smart choice. It offers the same benefits, like increased rents and durability, at a much lower price point.

Small Scale, Big ROI
If the thought of tackling a major property overhaul sounds intimidating, consider small-scale projects that concentrate on one property improvement at a time. The scope of small-scale projects is typically easier to manage, creating less difficulty for your employees. Additionally, in-unit work time is usually shorter with single-focused projects, causing less inconvenience for residents and shorter turnover times for vacancies.

Update Lighting
Lighting is an essential element of any multifamily property. Both internal and external lighting are important for safety, style, and functionality. For energy efficiency, upgrade to LED bulbs, which use 75% less energy than incandescent bulbs.³ Smart lighting is a trendy feature, especially with younger multifamily residents who like the extra control offered with smart technology upgrades.⁴

Modernize Plumbing
Outdated plumbing creates higher maintenance costs and inconveniences residents. To update your look and functionality without a full remodel, replace faulty features like leaky faucets or showerheads. Invest in modern plumbing like low-flow toilets, energy efficient faucets, and safe cover control garbage disposals to lower operational costs.

Install New Windows
Heat transfer through windows can account for up to 25% of your energy bill.⁵ Update single-paned windows to double-paned, low e-glass windows for maximum energy efficiency. Replacing outdated windows can create energy efficiency and add curb appeal for your property.

Upgrade Flooring
Residents are willing to pay up to $75 more in rent for hardwood floors.² To create a luxury look residents want on a budget, replace carpet with vinyl plank flooring. This offers the added durability, modern feel and luxury look of natural wood at a fraction of the cost. Lower long-term replacement costs while increasing rents with a better flooring solution.

Making small but noticeable changes can help you stay within budget and improve the value of units (a win-win!), which can allow for increased rents and improved resident satisfaction.

Sources:

1. Multifamily Executive, 2014
2. NAAHQ, 2017
3. Department of Energy, 2018
4. Multifamily Executive, 2017
5. U.S. Department of Energy, 2011

Focus on the Right Upgrades
To set yourself up for success, focus on the right project. For example, it would not be wise to spend money on a new fitness center if your roof has major leaks. If your property is in disrepair, focus on maintenance projects like replacing the roof, updating the HVAC system, or upgrading the plumbing. Fixing foundational elements ensures your property is running smoothly.

Once maintenance issues are addressed, consider in-unit upgrades. Residents will pay up to $52 more per month in rent for unit-specific upgrades.¹ For the biggest impact, focus on kitchen and bathroom remodels. Other popular upgrades include in-unit washers and dryers, hardwood floors, energy-efficient appliances, and a patio or balcony.

Property amenities add curb appeal, increase rents, and drive demand. Upgrades to property-wide amenities increase rents by an average of $77 per month.¹ Clubhouses, fitness centers, pet-friendly features, and package holding areas all positively impact rents. Determine which amenities your residents would like by conducting a resident survey.

Remember to Factor in NOI
As you take on capital projects, remember to maximize Net Operating Income (NOI). NOI is the total monthly revenue collected minus all monthly operational costs. The way to impact NOI with renovations is by focusing on projects that will increase rents or lower operational expenses.

There are a number of ways to increase rents and to lower monthly expenses. Rents are positively impacted by a number of factors. In-unit upgrades like hardwood floors fetch up to $75 more per month, while 46% of residents are willing to pay more for amenities like fitness classes.¹ Meanwhile, renovations that lower utility costs, such as an HVAC system upgrade or adding a smart irrigation system, will lower operational costs. In fact, heating accounts for 45% of monthly energy costs.² Upgrading your property’s heating and cooling system can cut energy usage by 20% to 50%.²

Stick to the Plan
You need a solid plan for your capital project to be successful. Work with your renovations company to develop a plan that outlines all aspects of the project, including goals, budget, materials, timeframes, and key team members. While flexibility is necessary with any renovation project, it’s important not to lose sight of the project roadmap. Tackling the right project, working to maximize NOI and hiring the right people maximize your plan’s shot at success.

Find Your Winning Strategy
Ultimately, capital project success is defined by meeting your project goals. Focus on the improvements that will preserve your property and benefit your bottom line.

Sources:

1. NAAHQ, 2018
2. EPA, 2011

Future Trends to Track

Demographics
Baby boomers looking to downsize and millennials delaying purchasing a home drive rental property demand the most. While millennials are still the largest group of renters (the 20-39-year-old age group represents a 43% share of all renters), baby boomers are the fastest-growing group of renters, increasing at a rate of 5.4% annually, as opposed to millennial renters’ 0.4% increase.¹

Smart Technology and AI
Smart technology is an essential part of the future of multifamily housing. 65% of residents feel their lives are hectic and look for ways to make it easier.² Convenience is king for multifamily residents, and implementing smart technology is key to meeting this need. In-unit smart home upgrades offer functionality that allows residents to control their homes remotely via their smartphone. This includes smart lighting, door locks, security video cameras and thermostats. Other smart upgrades, such as LED lighting and smart irrigation systems, incorporate technology that reduces monthly utility costs. Be smart by investing in technology-focused renovations.

It is predicted that by 2025, the AI market will top $126 billion.² One emerging tech trend that will be important for the future of multifamily properties is robotic leasing agents; some properties in large cities have already started adopting them.³ Robotic leasing agents operate with AI and use facial recognition technology. They will be able to take on a large number of tasks such as being available to greet and interact with tenants 24 hours a day and guiding property tours. They would also have the added bonus of establishing technology credibility for a property, which is important to the new generation of renters.⁴

To be relevant in the multifamily industry, it is imperative to implement the technology and lifestyle features residents demand. Focus on renovations that add value by modernizing your property.

Lifestyle Changes

Adaptive and Personalized Spaces
One trend that is gaining popularity, and is sure to continue in the foreseeable future, is convertible spaces that can transform to meet residents’ needs. The one size fits all solution is no longer a valuable option to consumers. 94% of residents want a space that can be personalized, and 78% of residents value convertible spaces.² Consider in-unit adaptability options, such as movable or retractable walls. For common areas, design the space with convertible furniture that can meet a variety of resident needs in one space, such as work stations for daytime use that can then transform into happy hour gathering spots.

Smaller Living Spaces
The future of multifamily housing is smaller units. The largest percentage of renters now often don’t have children to consider when exploring housing options. As a result, smaller, more affordable units are desirable. Microunits, which may be as small as 200-square-feet, are a viable option for residents.³ By incorporating mobile furniture and transitional living spaces, this option works. One key for success with smaller units is investing in amenity spaces. Create common spaces for social interactions, working, exercise, taking care of pets and even cooking.

Incorporate Hospitality Elements
High-demand consumers want luxury and personalized service. An emerging trend to meet this expectation is to incorporate elements found in the hospitality industry into multifamily properties. The main focus is on common areas and amenities to curate an intentional resident experience. Upscale amenities like rooftop bars, concierge service, state-of-the-art fitness equipment and shared chef’s kitchens allow residents to impress visitors with their luxury living accommodations. Incorporate hospitality elements to give residents the sense of community and experiences they want.

Today’s Trends that Will Remain Relevant for Tomorrow

On-Demand Delivery
The advancement of AI and data science allows companies to predict what customers want. In fact, 72% of consumers expect businesses to predict their expectations, including their multifamily rental company.² Residents want purchases and services delivered, including groceries, dry cleaning and even pet care. Add package lockers or package holding areas to make deliveries convenient for residents. Install individual package storage near each unit or dedicated storage for each floor.⁵ Most package storage companies’ systems integrate with standard resident portals for seamless and easy communication.

Work from Home
43% of Americans work from home at least part-time.⁶ Features like high-speed internet, in-unit office space and access to a business office are critical to residents who work from home. One hot trend, borrowed from the co-working rental business, is to add on-site co-working spaces for residents. Millennials, in particular, want community, and co-working spaces offer the dual benefits of keeping residents connected and giving them a workspace. This renovation also produces revenue. Residents will pay as much as $550 in luxury, urban areas for a dedicated desk space.⁷

Health and Wellness Focus
Wellness real estate, which offers positive health benefits and emphasizes mind and body well-being, is big business. 82% of residents seek properties with a swimming pool and fitness center.⁸ 42% of residents are willing to pay for outdoor amenities like walking trails and parks.⁹ These added features appeal to residents and drive rent increases. In-unit upgrades, including upgraded HVAC and air filtration systems, circadian lighting and soundproofing also promote resident wellness. In fact, 53% of residents say they won’t rent a unit that doesn’t have soundproofing.⁸

Sustainability
Sustainability-focused upgrades increase property values, reduce costs and increase resident satisfaction.¹⁰ Cost-effective green upgrades like LED lights, xeriscaping and smart irrigation systems lower utility costs with less energy and water usage.¹¹ Amenities like electric vehicle charging stations set your property apart to attract environmentally conscious residents. Consider using reclaimed materials, low-flow faucets and toilets and chemical-free materials.

Stay on track by staying on trend with multifamily renovation projects that retain residents, increase rents, add property value and lower operational costs. Don’t let your property fall behind the competition - stay focused on the renovations residents desire to keep your property well-maintained and attractive for years to come.

Sources:

1. American Community Survey, 2016
2. NMHC – Disruption, 2018
3. Bisnow, 2017
4. Huffington Post, 2015
5. NAA, 2016
6. Multifamily Executive, 2018
7. New York Times, 2017
8. NMHC, 2017
9. NAAHQ, 2017
10. U.S. Green Building Council – LEED
11. EPA, 201