Adding property value through curb appeal, leaving money on the table
Over the last 10 years or so that I have been doing apartment buildings, the properties usually fall into one of two categories, pride of ownership and not. Generally speaking when a building looks crappy on the outside, it is also crappy inside, and the tenant profile usually fits the project. Enhancing curb appeal is to me the best money you can spend on a building, even more so than suite renovations. Why? Well it is the first thing you see when you drive/walk by, the first thing prospective tenants see, as well as possible buyers of your property will immediately link the look of the project to the value, and the appearance will attract the best quality tenants who are searching for a place to live. Often these improvements cost very little, nice landscaping, paint, and a sign can drastically change the look for a few hundred or a couple thousand dollars. We are in the process of some major signage improvements to our Beaumont property simply because it is a long term hold and we wish to attract and retain the best quality tenant we can find for top dollar. A project with poor curb appeal shows me the darker side of making money in real estate, cutting expenses AKA slum lording which is bad for the community, the neighbours, and tenants.
The financial argument can be made with this simple example. Say you own a building beside your neighbour, same suite mix, same appearance, etc. Lets say you spend $10,000 on curb appeal. If you have a 20 suite building and because you look better than your neighbour you are able to charge an extra $10 per suite your building is now worth $40,000 more than your neighbour! $10 x 20 suites x 12 months is $2400 per year, capitalized at 6%. This simple financial equation escapes many people and it is easily argued that you must make these improvements from a financial perspective. Furthermore in times with low vacancies, the ugly buildings will be full with poor tenants and slightly lower rents, when vacancies rise the nicer projects are best positioned to retain their existing tenants through tough times while the latter is often forced, too late, to upgrade their project or have an empty building.