Investing money in updating units can be a win-win in the multifamily market in Eugene. Rene Nelson, CCIM, CRE, with Pacwest Commercial Real Estate, and Bob Nelson, real estate investment broker, with Pacwest Real Estate Investments, look at the local multifamily apartment complex market and the opportunities present in value add for investors.
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Value Add Multifamily Apartment Complexes
“My sweet spot is value added, and the reason that I say that is I see a lot of mom and pop operators who have rolled up their sleeves and earned every dollar that’s in their bank account. That just means a lot to me because of their work ethic. They may not have swung the hammer, but they’ve managed the properties, unclogged the toilets, and mowed lawns as they’ve built their 8-plex into a 20-plex, and now they own 14 different apartment complexes.” — Rene Nelson, CCIM, CRE, Pacwest Commercial Real Estate
A lot of times for a value ad, it may be as easy as going in and spending $4,000 or $5,000 per unit, putting in a new kitchen and a new bathroom, and ripping out the carpet because a lot of tenants really don’t like carpet. Tenants often prefer those laminate floor type finishes so that it feels a little cleaner to them.
Value add is a great strategy to consider because you can go in pretty economically by putting in finishes at about $5,000 per unit in an apartment complex and then raise rents. This investment can provide the opportunity to add $200 per month in rent for each unit. That adds up quickly when you have multiple units.
Of course, not every situation is a value ad just because the complex may be older and a little bit antiquated. You could go in and invest a lot of money, changing the complexion of the complex, only to find out that the appeal of the older property is now missing.
In some instances, it’s good to keep it up to speed. Decent carpet, the kitchen, and the bathroom are always the focus. High-speed Internet is of great importance. If you’re dealing with millennials and you don’t have an opportunity for high-speed internet, you have a big problem.
If you’re thinking about a value add, there are many issues to consider. Let the experts at Pacwest Commercial Real Estate help. Call Rene Nelson at 541-912-6583.
Ask the Experts is a regular video series featuring David Moore, Equity Advantage CEO. David teams up with industry experts such as Rene Nelson, CCIM, CRE, with Pacwest Commercial Real Estate, and Bob Nelson, real estate investment broker, with Pacwest Real Estate Investments to answer questions most asked by clients about 1031 exchanges, market trends, and opportunities.