In the last few years the rental market has seen a tremendous increase in rental demand. Between millennials that do not want a 30 year commitment and empty-nesters that are down-sizing and do not want the headache and the responsibility of owning their residence, the rental market has turned into more than just temporary housing; it is now a long term community.
With the shift in the mindset from temporary to long term housing, we need to look at how we can make communities more attractive and be able to achieve a higher return without making the landlord look while providing true value to the tenant. One way of doing so, is creating amenities which will increase the bottom line in both direct and indirect ways.
Indirect: amenities that the landlord doesn’t directly profit from. Such amenities increase tenant retention and property desirability, thereby decreasing turn-over and advertising costs
Direct: amenities that tenants pay to use
Dog Parks are a great example of indirectly profitable amenity. While the expense of building a dog park is relatively cheap, ($5,000-$10,000), from the tenants perspective the added value is considerable. A dog park in the community attracts potential pet owners who are not welcome in most communities; or if they are, the resident will be much more likely to select a community with this amenity. Not only does this increase profitability indirectly, but by attracting pet owners additional revenue can be garnered by charging a non-refundable pet deposit, and an additional monthly pet fee.
One example of an amenity that directly increases revenue and property value is community gardens. Community gardens are usually ~10ft x 10ft and allow the property owner to garner additional income by essentially renting out dirt. Most communities have unused landscape areas, and with minimal investment (~$500 per lot), these lots can be rented for $25-$40 per month and quite often have a waiting list to rent. At $25 per month times 20 lots this extra income equates to an additional $85,000 upon resale (at a 7% cap rate). Including the monthly income, that’s a 970% Return on Investment!
George Ullrich
Asset Manager
Creative Realty Partners