There is no fixed price for renovating a multifamily property. If it is an older property, it will usually cost a lot more to renovate than a newer property. Basically, the renovation costs depend on several different factors, such as the following:
- Age of the structure
- The number of units
- Square footage of each unit
- Materials and appliances needed
- Property Location
- Tenant demands
- The average income of tenants
The overall objective of renovating a multifamily property is to get a high return on your investment. There is no sense in going overboard with the renovations if you’re renting out your units to low-income tenants. Your goal should be to break even on your renovation costs within 1 to 2 years after finishing the renovations. Then, all the rental income earned after that is pure profit.
Learn More About the Cost of Renovating a Multifamily Property
The first thing you need to do is identify the most critical renovations that need to be done to create a comfortable, livable environment for your tenants. Some basic examples of such renovations include:
- Floor replacement
- Repainting the walls
- Electrical and plumbing improvements
- Roof upgrades and repairs
- Light fixture replacements
- New kitchen appliances
- Window replacements
- New kitchen cabinetry and countertops
- HVAC system replacement
- Landscaping improvements
Performing all these renovations on a standard 5 to 10-unit multifamily property could cost between $200,000 and $400,000. Of course, this is only a rough estimate for renovating the units of a small multifamily property. Your actual costs could be higher based on the costs of the appliances, materials, and labor fees of the professional home renovators in your area. If that is not within your budget, you can focus on doing the most important renovations first.
Here is an estimated cost breakdown of the essential renovations that you could make to each unit of your multifamily property:
- Flooring replacement – $2,000 to $3,000
- Kitchen appliance replacement – $2,000 to $7,000
- New kitchen countertops – $4,000 to $6,000
- New paintjob – $2,000 to $3,000
- Bathroom tile and fixture replacement – $3,000 to $10,000
- Electrical and plumbing repairs and upgrades – $2,000 to $6,000
Remember that you don’t have to do all the renovations at once. Most multifamily property owners will start with smaller renovations and then gradually work their way to bigger renovations as they continue collecting rental income. It is a great way to reduce your upfront costs because the rental income will pay for a significant percentage of your renovations along the way.
Add Extra Amenities for Maximum Value
Amenities are not a requirement, but they can help you retain and attract long-term tenants to your multifamily property. As the rental market becomes more competitive in certain locations, you may find it necessary to add more amenities to your multifamily property to make your units more attractive and valuable to tenants.
Some of the most popular amenities that tenants like include:
- Parking Lot
- Swimming Pool
- Gym / Fitness Center
- Gated Access / Security
- High-Speed Wi-Fi Internet
- Patio / Balcony
- Washer & Dryer
- Walk-In Closet
- Dog Park
The estimated cost of adding these amenities is anywhere from $50,000 to over $300,000. However, investing in these amenities should only come after you have made the essential renovations to your property first. Then, you can take the profits earned from your rental income and reinvest them into building these amenities.
Some amenities will obviously cost significantly more than others. For example, adding a walk-in closet and Wi-Fi internet won’t cost nearly as much as adding a fitness center and a swimming pool. So, again, start with the smaller amenities and then gradually add the bigger ones as you continue to earn profits from your rental income.
Learn More About the Cost of Renovating a Multifamily Property
Are you interested in renovating your multifamily property? Contact Peak Renovations if you have questions about the estimated renovation costs and the value that these renovations could bring to your property: cfaber@peakrenovate.com
