We are enjoying a very strong real estate market in California at this time! The rental market is thriving and with low inventory on the market, this is an ideal time to own investment properties in California. Given California’s diversity and the job market strengthening, we have a rising confidence in our economy. Given these excellent conditions, it truly is an investor’s ideal market. If you are an owner and are interested in holding your portfolio for the long term, this may be the perfect time to invest in your own assets and increase the property value and cash-flow.
Building/Land Capital Improvements
Give your building an architectural look, bringing it current. Perhaps modification to the club house such that it is an open air space during the day.
Social Gathering Spaces: Tenants in apartment complexes look for and enjoy the amenities they become accustomed to when traveling and visiting higher end hotels. Tenants are looking for common gathering spaces with cafés, Wi-Fi and club houses in order to enjoy a nice living space and/or game room.
Consider hosting a continental breakfast and/or happy hours. Consider renting out the club house for special functions such as weddings, birthdays or retirement parties. This is another ideal way to generate income and utilize a space that would be otherwise unused.
Another sought after amenity is a gym/fitness center. If you do not have the space for one on sight, negotiate a corporate rate with your local gym, providing revenue to your business and a discounted rate for your tenants. Fitness classes are another option for generating revenue.
Outside areas can be appointed with built-in barbeques, tables and benches for outside family gatherings. Playground/tot-lots are ideal for families with young children and dog parks, walking trails and urban garden spaces offering alternative amenities that are very attractive.
Unit Turn Overs: Consider complete unit renovation and upgrades at the time of turn-over, investing $15K to $20K, per unit. Install all high-end cabinets, granite countertops, wood or tile flooring, upgraded molding and finish it off with nice hardware and trim. This will allow you to increase rental rates, while at the same time provides the owner with tax incentives. Further, these high-end finishes will reduce your turn-over costs in the long run and have an increased life span.
Services: Negotiate various services with local vendor partners, ideal for growing businesses together. Consider concierge service and/or delivery services, which are enjoyed by tenants. Host educational classes and/or vocational classes in the clubhouse and or the gym – whichever is appropriate. Again, vendors in the area would love the opportunity to provide educational classes and the opportunity to meet with your tenants. Consider a Master Service Agreement with these vendor providers, for exclusivity rights to present and meet with the tenants on-site.
Another wonderful service for the working parents is an onsite after school program. The kids would be cared for and they can provide tutoring, organized games and overall care for the kids until the parents return home. This could be offered at a reduced rate to the tenants and provided by a local organization such as the YMCA and/or Boys and Girl Club, benefiting not only the families but the organization and the property owner.
Consider hosting a vendor night and/or job fair event onsite, provided all the companies pay to participate in the event.
Rental Rates: Now is the time to maximize your rental rates 5% to 10% per year. Given the strong rental market and property amenities and/or enhancements, this is an excellent opportunity to increase your cash flow.
Property Acquisition: Raising funds with friends and families is ideal for the acquisition of smaller properties and increases the cash-flow of the property. 1031 exchanges are great channels for the consolidation of smaller properties into a larger complex with more options for increasing the cash-flow.
Government/Legislation: It is important that we closely follow the leadership that we elect into office at the local government level. We need Senators who understand real estate business owners’ needs, fiscal responsibility to the residence of the state and a passion to streamline processes in order to promote the recovery of California’s current economic condition. We need legislation in place that supports and promotes business growth, so that we do not continue to export businesses and residents to other states that are more business friendly.
We anticipate the real estate market remaining strong for another few years. New construction coming online, rates leveling off, an affordability max, will likely have an impact on the market. There will be another 300,000 rental units being released this year, under by 100,000 units from prior years, a drop from 69% to 63% in new product coming online. Financing is tougher now than it has been in past years, and as interest rates increase there will be an impact on affordability. However, home ownership and home lifestyle is still very important to millennials as they move up in their careers, marry and want to raise a family.
The real estate market has enjoyed an overall positive upward trend. Investment owners will thrive in this strong rental market. As it is tougher to source and secure great property deals with strong cap rates as we have enjoyed in the past, now is a fantastic time to re-invest in your current portfolios and enjoy increased cash flow and cash-on-cash returns.
Elizabeth Reynolds is owner of Realty Advisors. For a free property management assessment, call (866) 613-7772 #1, or visit www.ReynoldsRealtyAdvisors.com