If you own or manage an apartment, you know that tenants can do severe and lasting damage to their residences. Sometimes unavoidable accidents occur; at other times, neglect is a contributing factor. Fortunately, through a system known as tenant-proofing, you can protect your residential units — and your real estate investments — from even the most careless of renters.
To learn more about tenant-proofing properties, we can turn to Joe Cornwell. Joe is a real estate investor who owns 16 residential units. Of course, we’ve spoken with him before. Earlier, he explained to us the “buy, rehab, rent, refinance, repeat (BRRRR)” method of investing.
As a refresher, three years ago, Joe made the first of his lucrative real estate investments. He bought a duplex right outside of Cincinnati, and he made this purchase after an 18-month search. Not to mention, he handled the entire renovation himself, which was a massive undertaking.
In addition, Joe self-manages his properties, which now include a second duplex and two six-unit properties. He employs two full-time contractors, yet he enjoys doing some of his electrical projects and other contracting work himself.
Now that we’re reacquainted with Joe, let’s take a look at his ingenious process of protecting residences from residents.
It’s easy to understand why many real estate investors feel more comfortable buying turnkey multifamily properties. As soon as those sales go through, they’re ready to find tenants and collect rents. There may even be tenants already in the building who are staying put. And they don’t have to deal with the costs, the headaches, and the uncertainties of major refurbishments.
Even so, one key to tenant-proofing is starting with a distressed complex. In fact, when Joe searches for a property, he looks for a place that’s in exceptionally poor condition. For one thing, it will be cheaper to buy. On top of that, the tenant-proofing process can be more thorough and customized.
Indeed, Joe will take such a property and tear it apart completely, stripping it all the way down to its frame and foundation. As a result, he and his team have total control. They can rebuild nearly every aspect of the building, making sure that each component is durable and high in quality.
When selecting and installing a multifamily property’s new HVAC system, electrical system, plumbing equipment, flooring, and so on, Joe is very particular.
With excellent materials and routine maintenance, those components should last for a decade or two. They’ll be extra strong, able to endure regular usage.
For example, Joe uses vinyl plank flooring in some rooms, which resists scratching. He also avoids carpeting, which often gets torn. In fact, over the past 10 to 15 years, many people — whether they own or rent their homes — have been doing away with residential carpeting. Therefore, this choice is on-trend.
Meanwhile, in kitchens, bathrooms, and other rooms where floors frequently get wet, Joe installs ceramic tile flooring. Those tiles can withstand moisture, splashes of water, and even standing water.
Similarly, Joe’s plumbing fixtures are heavy-duty and hardwearing. They’re not made of plastic or chrome; in most cases, they’re brass.
Many property owners, however, will choose plastic or other cheap materials over brass. And, for sure, brass fixtures cost more than their plastic counterparts.
However, brass plumbing fixtures last longer and are unlikely to leak. When you factor in the repairs and replacements that plastic fixtures require, the brass versions will almost certainly save you money in the long run. They should save you plenty of time as well.
As you can imagine, when you tenant-proof your property, you incur extra upfront expenses. However, you can offset those higher real estate investments by charging higher rents.
In order to charge higher rents, though, your apartments must be as enticing as they could be.
To that end, Joe gives his apartments a number of stunning cosmetic updates before he rents them out. These upgrades represent the final step in his tenant-proofing process.
Take, for instance, Joe’s typical kitchen. For starters, he installs cabinets that resemble white shaker cabinets. Those items are highly coveted in today’s real estate market.
Moreover, Joe puts in laminate countertops, which look like they’re made out of granite, instead of going with cheaper Formica countertops. And he’ll complete the overall effect with tile backsplashes.
To give you another example, Joe insulates all of his common area floors. That way, people who live beneath or above other residents won’t hear the noises they make. And those quieter homes offer a better quality of life.
None of the items listed above are exorbitantly expensive. But people who tour Joe’s apartments are usually impressed by all of those touches. As a rule, renters appreciate quality and value, and they want to live in places they find welcoming and attractive.
More to the point, for such a residence, many people are willing to pay more money every month.
In short, once a multifamily property has been tenant-proofed, people can enjoy a greater return on their investment — renters and owners alike. It’s a fact that Joe Cornwell keeps taking to the bank.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.