Renovating Vintage Apartment Buildings – A Win for Investors and Renters
Value-add properties have always been a hot commodity, appealing to both Investors and first time buyers, who may have less down payment. These properties are older, oftentimes rent-controlled and worn down, making the prices much more affordable than pricey newer developments. Investors are purchasing these properties at the bottom of the market, renovating it, and placing it right back on the market at a substantially higher price.
What is the “ideal” vintage apartment?
These vintage properties are usually built in the ‘70s and ‘80s, during the apartment building boom. Investors look for a solid foundation with as little facial and structural defects as possible. Oftentimes, Investors have preset plans for the type of property they are looking to develop, meaning they have to have the right unit mixes, submarket, square footage, etc.
Why vintage apartments are a win for investors, sellers, and renters?
For Investors, these properties are well below their replacement costs. Instead of spending $250,000 a unit, these Investors are able to maximize their budget and profit from the exchange.
With such low renovation costs, Investors are able to rent the units at a much lower price and still make a profit. This is a win for renters, who are finding it extremely difficult to keep up with cost of living in popular areas such as Los Angeles, Portland, Seattle, etc., which are currently undergoing major development. New apartment buildings are springing up everywhere, making rents much higher than most people can afford.
What to keep in mind when taking on a renovation project?
Modern and improved amenities to an apartment renovation must be taken into consideration when starting a new project, making sure that the renovations will add value to the property once completed. Make sure the value exceeds the cost of running the apartment.
Investors should look into the market that they are looking to purchase in. Since some neighbors present higher demands and profits than others, it is imperative that buyers take the time to research the market in which they are investing. Also, look for development in the area that would either add value or reduce the value of your new asset.