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Owning an apartment complex is a business. And just like any business, you must look for ways to enhance your customer experience to reduce turn costs and attract new tenants. But in some cases, enhancements can be offered to tenants for a fee, and this provides the property with significant additional revenue. Over the past few months of our due diligence period for our new acquisition in San Antonio, The Regatta, the GP team has been planning property renovation projects but also evaluating potential services to offer tenants to increase revenue. Leasing Office Before and After Planned Renovation: First impressions are critical, so we are planning on revamping the leasing office inside and out. |
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We hired a design firm to help us update the property color scheme and amenities desired by tenants today. We recognize that all our planned work to renovate the interiors to increase the rents significantly would fail if the exterior hadn’t also been upgraded. Once renovations are completed, we will be able to attract higher-valued tenants with the means and desire to purchase additional services that we will be offering. Upgrading the property is like building a stool; you need to complete all three legs to make it work. |
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The above picture is from a year ago at the Regatta. Our design team has come up with a plan to make the area a fun gathering spot with a fire pit, cornhole boards, a barbeque area with high bar seating, and new pickleball courts to replace the non-functioning tennis courts. All of this will be visible to prospective tenants in the adjoining leasing office. |
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Additional Revenue Opportunities that we have identified: WIFI package – We have negotiated a contract with Google to provide internet service throughout the property, which we can offer to tenants at a lower price than they are currently paying. As part of this deal, we are paid $35/month per participant. Due to current participation rates, we anticipate that this will be a significant cash generator for the property, and this was not in our original plan. This alone will increase the value of the property by over $1M if we hit our projections. Package Locker – In our Sedona asset, we installed a package locker that tenants can pay $5 a month to utilize, and our experience has shown that a large % of tenants take advantage of this to keep their packages secure. We also anticipate that most tenants will opt in for this service, and this wasn’t in our original budget. Reserved Parking – By numbering the parking spots, we can reserve those spots closest to the doors and allow tenants to pay for the spot. We do this in Sedona, and based on that experience, we believe we can get somewhere between 20-40% participation at $25 per month per space. This should generate between $12-$24K per year, which increases the value of the property by almost $500K. Covered Parking – At Regatta, we have 85 covered parking spaces, which are highly desired, yet there is no premium currently charged to park there. We anticipate that we will be able to charge between $25 to $70 per month per spot for the convenience of parking out of the sun and rain. This additional revenue is not in our current plan. |
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Lakeview – 38 of the units have a beautiful view of the lake and all the wildlife it holds. Currently, these residents do not pay extra for the view. Our property manager believes that we should be able to garner a premium of between $50-$100 for these apartments. This is not in the initial plan. Enclosed Patios – Many first-floor units have a grass area behind their unit that could be fenced in for privacy. Our property manager has examples of other properties getting anywhere from $25 to $40 a month additional for installing a fence in the back yard. This potential income is not included in our original numbers. What could this enhancements mean for returns: |
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As you can see by the sensitivity analysis in the table, adding additional revenue and reducing the exit cap assumption to a level that many others are using today in their underwriting, the projected performance for our investment in The Regatta could easily surprise on the upside. Our approach is to be conservative in projections but strive to enhance the NOI with thoughtful revenue opportunities that bring value to tenants. |
