Raising The Value of Property 

It might be helpful to think of apartment syndications as large-scale house flips. The goal is for the property’s management team to figure out what changes can be made to increase its value and eventually sell (or refinance) it for the highest possible price. There are two general approaches to doing this: by increasing the asset’s income and/or by decreasing its expenses. The bigger a commercial property’s profit, the greater its market value. Maximizing an apartment complex’s profits thus maximizes the upside for investors upon sale. As a reminder, passive investors do not need to worry about the details of executing these changes, although information about them should be made available upon request for transparency purposes.

There are several ways to raise the value of a commercial real estate property, including:

1. Increasing Occupancy: One of the most effective ways to increase the value of a commercial property is to increase the occupancy rate. This can be achieved by improving the property’s amenities, offering competitive lease rates, and implementing effective marketing strategies to attract new tenants.
2. Renovations and Upgrades: Investing in renovations and upgrades can improve the aesthetics and functionality of a property, making it more attractive to potential tenants or buyers. Upgrades can include new flooring, lighting, HVAC systems, and energy-efficient features.
3. Improve Property Management: Efficient and effective property management can lead to increased tenant satisfaction, reduced vacancy rates, and higher rents. This can be achieved by implementing effective maintenance and repair programs, responsive communication, and proactive management strategies.
4. Increase Rent Rates: Raising rent rates can directly increase the value of a commercial property. It’s important to ensure that any rent increases are in line with market rates and won’t negatively impact tenant retention.
5. Expand the Property: Expanding the property by adding additional square footage or improving the current layout can increase the value of the property. However, it’s important to consider the cost-benefit analysis before undertaking any major expansion projects.
6. Invest in Technology: Implementing modern technology such as energy-efficient systems, smart building systems, and enhanced security features can improve the overall value of a commercial property.

You don’t need to make massive changes to the property to see very significant raises in market value, either. Here’s an example of small additions that drastically raise an asset’s net operating income (NOI).

Imagine a 100 unit apartment building. For simplicity, let’s assume that each unit is identical and rents for $1,000/month upon purchase. Suppose we made two small value additions to each unit: charging tenants an extra $50/month to install in-unit laundry and $25/month for utility billback. This new income of $75/month across all of the apartments will generate an additional $7,500 a month and extra $90,000 per year! At a market cap rate of 5%, the increased value of the property would be an astounding $1.88 MM!

It’s important to note that these strategies will vary depending on the specific property and market conditions. Consulting with a commercial real estate professional can help identify the best strategies for raising the value of a particular property.

Join my private investor club today to learn more about how we increase the value of our properties.  www.senateeskridge.com/invest