When it comes to quality rental units, the little things count
*NOTE – This article was originally written in May of 2007 for the newsletter.
Working with investment real estate offers me an opportunity to talk shop with all kinds of landlords and view all types of apartments, across St. Louis. One thing that always astounds me, is the lack of quality rental units in town. There seems to be a perception that there is no market for quality apartments. In my experience, that simply isn’t true. Putting those careful touches on your units can go a long way.
As an example, I’d like to use a couple of 4-families I own together with my own family in the Shaw Neighborhood. All the units in these buildings were totally rehabbed in the early 90’s. When we bought them last year, the floors had been upgraded to hardwood and some of the kitchens had been redone. At the time, all the occupied units were filled with Section 8 tenants paying rents from $650 to $685. All in all, the buildings were in pretty good shape.
Many landlords would have just left things as they were and continued to run the building in its purchased state. However, we decided that we wanted to run these buildings at their full potential. Nine months later we are feeling the effects of this decision. Even though we have lost many a weekend due to our labors at the property, we couldn’t be happier with the results.
We haven’t had to do anything major in any of our units, but each time we have a new vacancy it takes weeks to get these properties running at our quality level. Those nicks in the walls and paint splatters take time to fix. That horrible, uncaulked, quarter-round trim takes time to replace. Broken closet door hardware has also been a consistent problem. A kitchen has needed to be redone here and there.
The key is treating quality units as if they are going to be sold as condos. The little things that many landlords skip over for sake of time have to be addressed. You also need to get creative with the painting. White, beige and light yellow don’t make for the most attractive setting. In our latest unit, we took this concept to a new level. Bright green, orange, and multiple shades of blue were the colors of choice. The paint costs the same as the more traditional colors, but the effect on the appeal of the unit can’t be easily measured.
This extra effort has made it much easier to find new tenants and push rents. There has been so much interest that we are already pre-leasing units, which will not be ready for almost two months. Our initial rental efforts were going for $725 per unit. The most recently completed units are reaching as high as $760 a month in rent. This high level of interest not only puts more money in our pockets, it also allows us to be more choosy of the tenants we allow into the building.
Of the eight units in these two 4-families, we still have three more to bring to our level of finish. Additionally, we are also finally getting the chance to address some the exterior issues that were untouchable during the winter. When we’re finished, we’ll have a couple of buildings that will require little to no attention to keep up, and eventually fetch a hefty price at resale. Taking that extra time to make sure you dot every “I” and cross every “t” can pay off. The next time you have a vacancy, don’t just patch and re-rent, bring it up to the level it should be.