How We Achieved a $300 Rent Increase: A Multifamily Unit Upgrade Case Study

At Old Money Capital, our approach to upgrading units in multifamily properties is both strategic and tailored, ensuring that every modification maximizes the property’s value and appeal to prospective tenants. This blog post delves into our methodical upgrade process with a real life case study from an apartment we own in Modesto. It  illustrates how thoughtful enhancements can lead to significant rent increases and, consequently, a higher property valuation.

The Case Study

In one of the apartments we own in Modesto, a couple of units became vacant. One of them was a 1 bedroom upstairs unit (Unit 23) and the other was a 2 bedroom downstairs unit (Unit 2).

Methodology

Here is what we do for every unit upgrade project:

  1. Evaluate the existing condition of the apartment
  2. Market Data Analysis and ROI Calculations
  3. Prepare A Budget 
  4. Decide the Upgrades and Contractors
  5. Execute the Upgrade
  6. Test the market

Let’s go through each of these steps we followed for the two units that became vacant.

Assessment of the Existing Situation

After Inspecting the units, here is what we discovered in Unit 23:

  1. It gets too hot as it’s an upstairs unit and it has one window unit that can barely cool the kitchen let alone the rest of the unit. 
  2. The cabinets were in good condition
  3. The kitchen appliances were too old.
  4. The carpet needed replacement.
  5. There were no lights in the bedroom and the living room.

Our inspection of Unit 2 discovered the following

  1. Overall, the kitchen didn’t look that great.
  2. The flooring was new and didn’t need any upgrades.
  3. There were no lights in the bedrooms and the living room.
  4. The AC situation here wasn’t good either.

Market Data Analysis & ROI

Our area rent analysis revealed that prospective tenants were willing to pay higher rents for nicer units. The gap between current rent and median rent for the two units were $200 & $300 As per our analysis, unit 23 if upgraded right could support a $200 rent bump and unit 2 can support a $300 bump in the rent.

Once you know what you can get back from the upgraded unit, a detailed investment analysis was done to evaluate the return on investment. It requires spreadsheet math that looks like the following:

Prepare A Budget

Based on the above factors and the budget we have set aside for upgrading all the units, we decided to spend $10,000 for unit 23 and $20,000 for Unit 2.

Decide The Upgrades and the Contractors

All the quotes we received for adding HVAC to Unit 23 ranged from $15,000 to $18,000. This would have exhausted our entire budget for the unit and even exceeded it, preventing any further upgrades. However, Sameer, one of our partners proposed a cost-effective alternative: installing a Split AC system, which is much cheaper yet equally effective. After thoroughly vetting contractors, he found one who could install it for just $6,500—Bingo! With the savings, we decided to upgrade the kitchen sink, appliances, carpet, and install recessed lighting. We also opted to paint the unit and refinish the kitchen cabinets to enhance their appearance.

For Unit 2, the quotes for comprehensive kitchen upgrades ranged from $18,000 to $22,000. Using his creativity, Sameer chose to contract most of the kitchen work to the kitchen remodel contractor but handled smaller tasks with our trusted vendors, saving us several thousand dollars. In addition to the full kitchen upgrade, we upgraded the appliances, installed recessed lighting in the living room and bedrooms, and replaced the wall plates for the electrical outlets. Sameer personally chose a specific sink to ensure it complemented the overall aesthetic.

Execute The Upgrade

We made regular visits to the units to ensure that the contractors were completing the work on time and with the expected quality. Several times, we requested changes to the ongoing tasks and also decided to tweak the upgrade plan. We encountered multiple unexpected challenges as we discovered issues during the renovation. Consequently, we went slightly over budget and extended our timeline by a few weeks for both units. However, such deviations are often anticipated in upgrade projects.

Here are the results of our work:

Unit 2 Before Upgrade
Unit 2 After Upgrade
Unit 23 After Upgrade

Test the Market

In order to test the market, we hosted an open house for the units and marketed the event on Zillow and other websites. One of our team members also made a post on Facebook Marketplace. We received a great response from potential tenants. Unit 23 was rented at our listed price—$200 above the previous rate—within a week, and Unit 2 was rented at our listed price—$300 above the earlier rent—within a couple of weeks. The existing tenants also visited the renovated units during the open house. This was a huge morale boost for them as they could clearly see our commitment to investing in the apartment complex and improving their living conditions. In the future, we plan to approach some of them to discuss if they would be willing to pay higher rent for specific upgrades, such as the installation of a Split AC unit.

Conclusion

At Old Money Capital, we believe that thoughtful, methodical, math backed and well-executed upgrades are key to enhancing property value and securing maximum returns on investment. By carefully analyzing each element—from the type of upgrades to the execution—we ensure that our properties not only meet but exceed market standards and tenant expectations.

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