When I let go of what I am, I become what I might have been.” Lao Tzu

I am not trying to be overly philosophical, but when you look at your multi family building, do you still see the potential that attracted you to it initially? If you have a number of units that are bachelor or studio units, could you maximize a greater potential? This is something to consider, especially if you current have any vacancies.

BACHELOR AND STUDIO UNITS. It is commonly held that a unit mix consisting of a majority of two bedroom 1 bath units is most desirable and superior to one consisting mostly of one bedroom units, studios and bachelor units. For the sake of this article, bachelor units are usually defined as small studio units, consisting of a sitting room/ bedroom, a bathroom and a kitchenette. I have seen bachelor units (and actually owned one) where the kitchenette was comprised of a sink and some cabinets and a counter with room for a microwave oven. We installed a stove, removed some cabinets and marketed as a studio unit. Although it is sometimes said that the difference between a bachelor and a studio is unit size, most units without an actual bedroom are marketed as studios.

DESIRABILITY. The difference between a studio or bachelor unit and a 1 bedroom unit is usually the vacancy rate. It is inconvenient living in a unit where there is no private bedroom and tenants will typically look for a more liveable one bedroom unit as soon as possible. I once had a client who owned a number of units with all studio units. He developed a brilliant concept for changing them into one bedroom units by changing a kitchen into a bedroom and building a separate area for the kitchen using a counter area. The concept used the same square footage as before, but made the units more desirable, which commanded better rents and created less turnover.

LARGER UNITS. The same can be said for converting one bedroom units to two bedroom and in some cases even adding a third bedroom. I have seen 1000 square foot one bedroom units, which seem like wasted space, but any large space could be more carefully divided. Even without such large square footage, it is often possible to create an additional bedroom. Some units have a dining room or a den which could be made into a bedroom.

VALUE. The reason you would want to have a better unit mix is to create value in your building. Just as raising rents and a new paint job can increase the equity in your property, a unit mix consisting of mostly 2 bedroom units will generally be more valuable than a majority of studios and 1 bedroom units. This should increase your GROSS SCHEDULED INCOME, as well as your property value. This is important if you decide to sell, or refinance.

“It is action that creates motivation.” Steve Backley

What we at PRS PROPERTIES CAN DO. We can give you a good idea of the current value of your building. We can suggest changes you might want to make before sale to give you an idea what type of building you would be able to exchange into. You may decide to stay in the rental business. We are always available to chat. We can give you referrals for professionals, such as lenders, contractors, and engineers, so that you can decide who you feel best with. We can supply you with rent and sale comparables in the area of your properties, so that you know what rental values are in your area. It is important that you know the true value of your rental units, so that you can get them rented right away at market value, or at least as much as possible with rent control restrictions. We can look at potential purchases that you may be interested in to make the property more desirable, and maybe look at potential issues that an insurer might require you to repair.

If you should decide to sell your building, we can help you exchange into a larger or smaller properties. We can even help you move into something with less management responsibilities. We can also help with getting the paperwork together for a refinance if that is your desire. We can also recommend experienced licensed contractors who can perform any repairs or installations you may need prior to selling. We can also look at your building for other easy and inexpensive changes that might allow you to get a higher value. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We are currently looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We can offer a 7 day escrow and all cash at closing. Give us a call. We have also put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are currently in 1031 exchanges and need to identify a replacement property before their 45 day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.