Multifamily Re-development – 2023
GNP Realty Partners believes in the value of multifamily investment properties, assuming you find the right property (more on that in a minute). One primary advantage of multifamily investments is that, when fully occupied, the owner receives a consistent cash flow while enjoying potential appreciation when vacancy rates remain low. We’re such a believer that our owners recently purchased a 27-unit apartment building in Evanston with the intent to modernize each unit and upgrade the exterior areas. The challenge is the building is fully occupied.
The property was a former commercial space re-zoned for residential (with one small commercial space remaining). The building was built in 1950 and updated in 2010, but the loft-style, open-floor plan units need modern finishes in the kitchen and bathrooms. Current rents are significantly below market rates. While rents will increase at the next renewal period, interior upgrades and other new amenities, e.g., smart home security (think facial recognition) and app-based temperature control, accompany the rise in rents.
Lease renewals spread over the next year, with the first four renewal windows coming in early 2023. While no tenant wants a rent increase, the approach of our property management team is to work individually with each tenant to accommodate their decisions and preferences associated with the intent to renew and the timing for modernization.
For tenants who opt not to renew, we will delay work until they have vacated the unit. For those remaining, we’re working with their schedules to minimize the disruption. If a renewing tenant prefers not to upgrade their unit, we’ll accommodate their wish, although the rent will increase with the next lease renewal, regardless.
As property managers for the building, we anticipate a high non-renewal rate, although we recently completed our first renovated unit for a tenant who has chosen to remain. We’re excited we can now show a finished version of our vision to tenants still weighing the decision to stay or leave. While we’d love the community to remain intact, our first consideration is to treat every current tenant with respect and to support their decisions.
The experiences of modernizing a building unit-by-unit based on occupant-driven timelines are insights we bring to every property we manage or provide construction services. We’ll take the same care of your property as if it was our own, leveraging the resources of our full-service operation, including development, brokerage, management, maintenance and security.
For anyone considering investing in real estate, read these tips for finding a good multifamily investment property, prepared by GNP’s development arm, ONE Development.