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therealestatesparkblog · 6 years ago

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7 Creative Ways to Add BRs, BAs & Other Value-Adds to Your Rental [With Pics!]

Withapartments and other commercial real estate, its common to talk about a value add or a value play. These are basically improvements that you can add to a property to increase the propertys valuemore so than the cost of the improvement. Thus, value add investors are often looking for a property they can upgrade or alter in some way to increase value instead of simply investing in a performing asset and getting a certain return. While most single family investors think in terms of buying and rehabbing a property to be all in for 70 or 75percent of its market value,there are also value-add opportunities that can drastically improveyour ability to get the highest rent or sales price out of a single family home. 1. Adding a Bedroom The most important time by far to add a bedroom is when you have a 2-bedroom house, although this is only true if the house has enough square footage. Indeed, when you have more than three, sometimes you can afford to lose one. We had a house with four very small bedrooms once. People tend not to like small bedrooms, so we simply cut out a wall between two of them, and then instead of refinishing the hardwoods in that room, we added carpet to hide where the wall was on thefloor. Yes, we lost a bedroom, but there was now an awe-inspiring master bedroom to impress prospective tenants. Now, the reason it is so important to have at least three bedrooms if possible is that most families whohave kids want at least three bedrooms. Thats true even if they only have one child because often the third bedroom is used as an office. And given that,if you have a house with two decent sized bedrooms and can only make a small third, its probably worth doing. There are several things to look for when attempting to add a bedroom. The first thing you have to note is that unless you plan on building an addition (an expense that I dont believe is usually merited), you will need to sacrifice something for that extra bedroom. You must ask yourself, what are you willing to sacrifice? The best situation is when there is a bonus room. You do not want to turn all of your common areas into bedrooms. Youll need at least a living room and preferablya living room and a dining room. But houses often have a bonus room or something to that effect. As long as its large enoughin most cities, 10 feet by 10 feetall you need to dois add a door (maybe a wall) and a closet, and youve got a bedroom. And if the tenants who move in want it to be a bonus room, they will still have that option. Also, be on the lookout for extra large living rooms. You dont want to get rid of most of the common area, but some houses, particularly some older ones, are just laid out ridiculously. Taking a slice out of one of those rooms to add a bedroom has made sense for us on more than one occasion. Related: 8 Clever Ways to Save Big Bucks on Your Next Fix & Flip And, of course, there are more drasticways. 2. Garage Conversions I am usually not a fan of garage conversions. For one, they usually look awkward, even if you replace all the siding in front. Most of the time, it just seems like something is missing when you look at a house with a garage conversion. Indeed, a study by G. Stacy Simans and David A. Macpherson found that a garage added 13 percent to a propertys sales price, while an additional bedroom added only 4 percent withsquare footage being held constant. That being said,there are times when garage conversionsmake sense to do. There is a large subdivision called Ruskin Heights in Kansas City that is rather depressed. Virtually every house there is a 3-bed, 1-bath ranch. Manyof the tenants in thisarea are on Section 8. And since the amount Section 8 pays is partially based on the number of bedrooms,many investors converted the garage to an additional bedroom. There might also be situations where a house has only two bedrooms, but both an attached and detached garage or a 2-car garage. In these cases, it would sometimesmake sense to convert the garage. 3. Finishing Basements and Attics OK, I will note that I am almost always against finishing a basement. I have walked into far too many REOs with half-finished basements that some hapless homeowner thought they could take out a second mortgage on to finish before it all inevitably went awry. This is doubly true since many appraisals wont even count bedrooms, bathrooms, or square footage in finished basements (even walkouts). Instead, they just check a box titled finished basement and give you a little adjustment. For me to even consider finishing a basement, the following things must betrue: The neighborhood is strong.It is a walkout basement (one side is above ground, one is not) with easy egress. If both arenttrue, forget about it. If it is a walkout basement, finishing it might make sense, thoughespecially with basements that already havesolid walls and some sort of ceiling over the floor joists.For example, the following picture is in a finished basement because the other side of the house is below grade: Appraisals may not always consider this space, but buyers and renters sure will. Just make sure any bedroom you put in a basement has an egress window (one someone can get out of) in case theres a fire. Its against code for a bedroom not to have this. And one more quick note. Even if a basement is not a walkout, but is orderly and preferably (although not necessarily) has a ceiling,painting the walls white and the floor grey makes it come to life as a sort of semi-finished basement. And its really cheap to do:

4. Making a Half Bath Whole and Adding Bathrooms Some half bathrooms are really small, and theres just nothing you can do. But if there is extra space, its a good idea to finish it. That expense will almost always pay for itself. From that same study noted above, a full bathroom adds 24 percent to the price, whereas a half bathroom only adds 15 percent. Stand-up showers just dont take up that much space. So, for example, if a bathroom looks like this:

It very well is worth adding a shower since youve got the room, even though youd have to move the toilet and replace the vinyl to do so. As far as adding a full bathroom, unless it isa huge house, I would only consider it if the house had only one bathroom. Other than that, it really depends on the value of the house and whether there is space for it. In lower-end neighborhoods, it would generally not make sense. But in higher-end neighborhoods, it very well might. This is especially true if there is a genuine master bedroom that lacks a master bath. In those cases, I would likelyadd one. 5. Opening Up the Kitchen There is nothing that sells a house like the kitchen. Any confined, closed-off kitchen simply wont do. Sometimes, however, theres no good way to add space to a kitchen. Luckily, you can still make it feel open by opening up a wall to the living or dining room. It could be as simple as cutting a rectangle in a wall. And you can even add a bar top to that for an added bonus. Heres an example of one such god-awful kitchen we had:

Nowjust look at thedifference opening up that wall and adding a bar top made:

Andeven something like this helps immensely: 6. Adding Storage If a house has neither a garage nor a basement, it is probably a good idea to add a shed in the backyard. Peoplelike their stuff and need some storage for it. You can buyashed from Home Depot of Lowes for less than $1,000,anda lot of prospective renters and buyerswill need something like this in order to sign on the dotted lines. 7. Improving the Aesthetics (Particularly the Front) Never underestimate the power of aesthetics. Even small things can make the difference. Compare the following two pictures of the same 4-plex:

All we did herewas paint the trim, add window boxes and awnings, and it completely brought the property to life. Or even something more simple, like this:

Related: How to Reposition an Apartment Complex and Add $2,000,000 in Value in 12 Months There are all sorts of easy fixes like this that add far more value than theycost: Repaint the front or just the trimWash the house or power wash if need beAdd window shuttersAdd window boxesAdd window awningsRemove ugly window awningsRemove satellite dishesReplace an ugly exterior light fixturePaint the front doorReplace the mailbox and/or address numbersWeed kill the drivewayHedge the trees and bushes in front as well as basic lawn careAdd bark mulch to the front yardPlant grass if the lawn is deadAdd paver stones if there is no walkway to the house other than the lawnRepair any unsightly fences or gatesAdd some arborvitae or other plantsEtc.Conclusion There are certainly other ways to add value, including more drastic measures, such as mother-in-law quarters, turning the house into a duplex, adding an addition, etc. But for the most part, the above ideas can add substantial value to any flip or rental, and you should be at the ready to use them when the time comes. Were republishing this article to help out our newer readers.

What additions or renovations do you add to properties to increase value? Let me know with a comment! https://www.biggerpockets.com/renewsblog/7-creative-ways-add-bedroomsbathrooms-value-add-amenities-house/

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