Part 2 of why I love real estate, especially apartment buildings, the big lift!!
Renovations in apartment buildings pay big bucks. We have just completed a top to bottom renovation of our 2 story townhome style apartment in Beaumont Place. The renovation cost was $8700 and we were able to bring the rent up $275 from $975 to $1250 per month. What’s the big deal? Well this increase alone increases the value of the building by over $50,000! A very respectable 475% return on the renovation cost invested.
How? well this is the magic part of commercial real estate. The value of the property is based almost entirely on the income that it generates. I anticipate that we will be able to raise rents by $200 per suite x 14 suites, which will increase the value by over $500,000! $200 x 14 suites x 12 months = $33,600. Capitalize that by 6% which is what apartments are selling for these days, and the big lift works out to $560,000. This is a proven strategy for a win/win situation between tenants, landlords, and the community. The opposite method to make money in real estate of course, slum lording aka. cut expenses. Stay tuned for part 3!