To stay competitive in the multifamily market, it requires not only great customer service but staying current with design and architectural trends that will modernize the look of your property, improve the residential experience and, ultimately, increase rents and the value of your asset. Even in this more difficult environment of higher interest rates, renovations may be required to attract residents and maximize rents.
Of course this requires a renovation project which can be daunting due to the time, effort and investment required. In particular, in the current environment of higher interest rates thorough capital planning, renovation execution and spend control are paramount.
There are a number of key stages in the renovation process:
- Creating a renovation strategy: This involves collecting input from stakeholders, planning out at a high level what you want to renovate and forecasting the possible rent bump in a particular market.
- Building the pro forma: the next step is to identify the vendors and obtain budgetary quotes and timelines. With this information you can build a pro forma that incorporates the rent bump, costs and timelines to generate the ROIs, NPV and payback.
- Securing Financing: This involves budgeting and raising investment capital and/or securing loans. If you are an investor-operator then you may already have available funds set aside for such a project.
- Contracting with vendors: This stage involves a more detailed design and getting refined bids for the work needed and signing contracts.
- Renovation Execution: The renovation project includes demolition and construction. The efficient execution of a renovation is important to manage carefully across multiple vendors and multiple units. The goal is to ensure the minimum time to complete each renovation so the unit can be leased and start generating revenue.
- Documenting the renovation: Once the renovation is complete, it is important to document the new floor plans of each unit including finishes, appliances, and any other notable amenities. Ideally you have pictures of every unit that can be stored and accessed when needed.
- Marketing and leasing: Finally, the newly renovated property will be marketed and leased, hopefully at a higher rent achieving the intended ROI.
Even with a plan a multi-unit renovation project can be a formidable endeavor. Here are 5 tips to help you tackle your project:
- Talk with your current residents: if residents will live at the property during the renovation then communication is key.
- Take the time to let them know about your plans and communicate clearly and frequently with them about the construction timeline.
- Do your best to mitigate noise and avoid super early starts or late work.
- Ensure resident safety.
- Tap into current design trends and understand what sells in a specific market.
- Invest in sustainability such as solar panels and energy efficient windows and appliances.
- Add smart technology such as smart access and property-wide WiFi.
- Consider building out some mixed use offerings such as a cafe.
- Design common areas to be more biophilic such as improving sunlight, especially in winter months, and integrating more green space.
- Develop common amenities with an eye for active design, such as a gym and bike racks.
- Create a solid strategy and a detailed plan. The better your strategy and plan, the better the results you will see.
- Develop a detailed project plan and pro forma.
- Continuously measure against the pro forma as the renovation project progresses and make course corrections as necessary.
- Work with your vendors to generate an executable project plan.
- Consider multiple sources of capital. Loans are one choice, but not the only choice.
- Value-add loans are the most obvious source of capital, but when interest rates are high other sources may be preferred.
- Consider raising a private fund or even asking friends and family to invest.
- Leverage technology to help with capital planning, renovation execution and spend control. Technology can improve planning, reduce renovation time, and make it much easier to centrally project manage renovations across multiple units and multiple properties in your portfolio.
- There are solutions in the market that will help you with pieces of the renovation process but most fall short when it comes to providing an end-to-end solution.
- FacilGo Renovations is a comprehensive mobile- and cloud-based SaaS solution that automates the entire renovation execution and capital planning process. This includes building a pro forma, project management of the renovation in collaboration with your vendors, communicating and paying vendors, documenting floor plans and finishes with photos, and measuring ROI in real time against the pro forma.
If you are attending NAA Apartmentalize 2023 in Atlanta and want to learn more about renovations in the current environment, then grab a seat at the renovations panel on Thursday, June 8 at 2:15 PM – 3:15 PM in room B312/313A to hear from Brad Chandler, SVP of Sales and Operations at FacilGo along with other leading experts on the panel.
Read this case study “Klingbeil Capital Management Uses FacilGo To Document Renovations and Improve ROI”
For more information on the FacilGo Renovations solution stop by booth 2400 at NAA Apartmentalize (and enter to win a $500 Lowe’s gift card!) or send an email firstname.lastname@example.org or contact us via the website.