Theodore Roosevelt said: “Do what you can with what you have where you are.”

 Was he talking to owners of multi unit properties?

Maybe so. At the end of the day, the value of your building is going to be dependent on its income. This is going to come up with a sale or a refinance. It has been my experience that in most cases, a larger bedroom count will bring in more income than a few more square feet.

For example, could you get a higher rent for a 700 square foot 2 bedroom apartment or a 750 square foot one bedroom apartment?

OTHER FACTORS AFFECTING BEDROOM COUNT In California the “two plus one” approach, which is to say two people per bedroom and one in the additional space. Although this is not a hard and fast rule, and there are always exceptions, this usually works as a rule of thumb. In our example, this would put 5 people in the 2 bedroom unit and only 3 people in the 1 bedroom apartment.

CAN I MAKE A CHANGE? A few years ago, I had a client who was a general contractor. He purchased several four unit properties in Long Beach which each building consisting of 5175 square feet of living space. The original unit mix (1) 3 bedroom unit and (3) 2 bedroom units. All units had  (2) baths.

My client “reconfigured” the building WITHOUT ADDING ANY SQUARE FOOTAGE. By moving some walls, he was able to create buildings with (2) 4 bedroom units and (2) 3 bedroom units. This resulted in a substantial increase in the rental value of the building and the sales price. He was able to resell all the four unit buildings at a healthy profit.

SHOULD I MAKE CHANGES? I am not suggesting that this will work for every building, but it may work for yours. If you can get the building department on board, this method may be much cheaper than building an ADU. If this seems like a possibility for you, check with a general contractor who is experienced in these type of renovations. It may be difficult in some areas to get the unit vacant, but what if you have vacancies coming up?

Since this will most likely involve a refinance, always check with your CPA and your real estate attorney before moving forward.

What we at PRS PROPERTIES CAN do for you, is give you a good idea what your property is worth in the current market as compared to other similar properties. We can review your profit and loss statement and suggest changes that may allow you to get a higher value than you may have thought. We can let you know the types of units that are selling as well as the price point differences based on bedroom count.

We can do a rent survey to help you understand rental values in the area. Where are your rents in relation to “market rents” in your area? Remember, we are apartment owners too!

We currently have investors who are looking for “off market” properties and we have put together many, many transactions which involve properties that are not listed for sale. Many buyers prefer to buy “off-market” buildings because they feel that they are getting something not available to the general public. If you are thinking of selling, we may be able to get you an offer right away.