Return on improvements for MFH

I have a 3-bedroom unit that I’m currently in the process of doing some improvements to in hopes of pulling out some equity to fund further investments. Of course there are more than a few things which need to be repaired but what I’m trying to do is get the most bang for my buck…

In rehabbers opinions what are the best improvements to make affecting MFH?

It doesnt follow the same lines as SFH’s does it where kitchens, bathrooms, etc bring the most value in terms of improvements (my renters pay $500 per month I don’t think they qualify for granite countertops) Does this make sense :o

All ideas welcomed

Happy Holidays

As all income producing properties, it’s the income and expenses that matter. With SFHs the purchase is usually based on emotions and how much the buyer likes the place. With MFHs an investor will look at the numbers, the only reason they’d go inside is to check for deferred maintenance, room for capital improvements, etc. Don’t do anything above the $500/month market standards unless you could justify higher rents as a result. You’ll figure this out by comparing $500/mo. properties to $550/mo. properties then to $600/mo. properties and so on. Sometimes it can be very simply things like covered parking or just keeping the place in good condition. Eventually there will be a big jump in quality that will not be cost effective for 3 units, such as a pool, tennis courts, gated, etc. in a large complex.

There’s a few theories on what to do on properties. One guy has a rule where he won’t spend any money unless he can get a 20% return on it so that the improvement will pay for itself over 5 years.

Another one says do the best you can for the price the apartment brings in. That is for a $500 apartment, don’t spend so much so that it’s like a $600 apartment. Just think that when you’re working on it, make it the best $500 apartment, but don’t make it a $600 apartment when the most you can get out of it is $500.

In my case, there were certain things I did like putting in a dishwasher and a garbage disposal in the kitchen. It made the apartment easier to rent, but it didn’t bring in any extra rental income. On my second unit that I worked on, I skipped the dishwasher and the disposal and actually get more on rent from that unit than the first unit. Just one of those things where the 2nd unit was a section 8 tenant and paid a little above market and the first unit was just a market rate apartment. In certain areas, it doesn’t matter how nice the apartment is, people just can’t/won’t pay more for a nicer rental unit. The ones who can will just buy their own property.

Thank you much :smiley: