Larger multifamily properties (five units or more) are a great addition to a commercial real estate investment portfolio . As the owner and property manager you have direct control over the valuation of your property. Property value are more predictable on larger multi-family properties than smaller ones. The value of larger multifamily properties is more closely tied to the income that they produce.

Calculating the value of a multifamily property is simply a matter of finding the net operating income (NOI) by subtracting the expenses of operating the property from the income produced by it and then dividing it by the capitalization rate for the area. Expenses for interest and depreciation are not included in overall expenses when calculating NOI.

While raising rent is one way to increase the NOI of a multifamily property, there are other smaller, more creative ways to add value as well:

1. Sub-metering utilities can encourage tenants to feel more responsible for their own usage and decrease the monthly operating expenses.
2. Washers and dryers are not only popular amenities among tenants; including them in leases can also add $40 to $75 a month to a property’s income.
3. Long-term multifamily investors can save money on utilities and maintenance by switching to LED lighting in common areas.
4. Renting vending machines to place in common areas, especially ones with laundry essentials in a communal laundry room, can increase your property value.
5. Garages, carports, and storage areas are all amenities for which tenants are willing to pay additional monthly fees, especially if they can pay to reserve a specific parking spot.
6. Renovating interiors, common areas, and the curb appeal of your property in addition to the apartments themselves adds value by enabling you to raise rents.
7. If you allow pets, charge for them. Pet rent can often go as high as $100 per month.
8. Custom services can often bring in extra income. For example, if your building doesn’t have a convenient trash chute for residents, offering trash pick-up services for an additional monthly fee can be a popular option for tenants.
9. Larger complexes or management companies can partner with internet and cable providers and receive kickbacks when residents sign up for services or can provide a basic package for every unit that is included in the rent.
10. Renegotiating the operating expenses for your property for everything from cleaning to maintenance to landscaping will also increase your NOI.

While these items may appear to only add a few dollars here and there, the goal with these kinds of changes is not to drastically increase a property’s cash flow, but to gradually increase its value for the long term.

If you’re interested in purchasing or renovating a multifamily property in the Colorado area, a private capital loan from Montegra can get you started by helping you cover the purchase price or providing additional funds to pay for rehab projects. Contact us at 303-377-4181 or loans@montegra.com for more information about our private capital loan programs.