An Unsolvable Problem- Solved!
Sometimes the cost of a particular remodel outweighs the potential benefit gained through increased rents. Such was the case with a 9-unit building in the Marina.
All of the kitchens had built-in cabinets on a side wall adjacent to the kitchen sink. These were in good condition. The problem was the sloping counter on either side of the sink was very narrow and is covered with small tiles, many of which were broken. There were no cabinets under the sink so the space was wasted. If we wanted to install a new counter and sink and cabinets underneath, we would either have to replace all cabinets for a match or pay an exorbitant price for custom made cabinets to match the existing ones. Either way, the cost appeared to be prohibitive.
Then one day, one of our carpenters, who installs granite counter tops, casually mentioned that he had bought a cabinet manufacturing business. This immediately sparked our curiosity so we asked him for a quote on the installation of new narrow cabinets underneath that matched the existing cabinets along with a new granite counter, sink and fixtures. He gave us a figure that was too good to refuse.
We are currently changing over each unit as they become available and are renting them more quickly and at a higher rent than before.
We calculate that the extra rent we collect due to each kitchen remodel translates to a $20,000 increase in property value.
Refurbishing Pays… Big Time!
We have proven time and again to our owners that updating kitchens and bathrooms at every opportunity will greatly enhance income. Sometimes the remodeling needs to go beyond the units.
Years ago we helped a client purchase a 9-unit Victorian in an area best described as “blue collar.” Every single unit, with fixtures and appliances that looked like they came from a flea market, begged for upgrading. The walls in the hallways and stairs were covered with cheap plywood which hid a multitude of cracks and holes in the underlying plaster. The common area carpeting was an unsightly mouse color.
In those early days money was tight so we were limited in what we could spend for upgrading. We had to be very creative as to who we hired and what we purchased. We were constantly looking for deals in linoleum and carpeting, stoves and refrigerators, ceramic tiles and window coverings. In spite of that, we managed to constantly improve each unit as it became available. We were able to rent each refurbished unit at market rate for the area.
As time passed, the area became more gentrified and we realized that we could make a quantum leap in our income if we made the hallways more attractive. We had repainted the exterior which looked great, but the hallways were dingy and uninviting.
We developed a plan of refurbishment for the common areas and got the full agreement of the owner. Working one hallway at a time, we removed the plywood, repaired and re-surfaced the walls and ceilings, installed new lighting fixtures, applied an elegant two-color paint scheme and replaced the carpeting.
Now, when we show refurbished units, we often get comments about the attractiveness of the entire building. We now rent units faster and are getting top dollar for the area.
As a result of our efforts we calculate an increase in property value of at least $200,000.
The Case of the Wayward Turntable
In the property management business we are faced with challenges every day. Some are routine, others are unique. Our success in the business is, in part, a result of our ability to think outside of the box. The following is an example.
One of our buildings, a luxurious two unit dwelling on Russian Hill, has a 3-car garage with a long descending ramp leading to a turntable which is used to rotate cars 180 degrees so they may be driven up the ramp forward rather than backward.
Over time, a problem developed when the wheels that support the turntable started chewing up its underside making it extremely difficult for the table to rotate smoothly, if at all.
As the cost of a new turntable would be in excess of $30,000 installed, we opted to repair the old one. We hired a mechanical engineer with turntable experience and proposed installing a circular track of ½” steel on the bottom side of the turntable and installing new heavy-duty space-age wheels to eliminate metal-to-metal noise.
The engineer rigged up a hoist system to lift the turntable four feet up so the deep groove on its underside could be filled in and the steel ring attached. Minor adjustments were made to the assembly that drives the turntable and it was lowered back in place.
The system now works perfectly and quietly and will last for years. The cost: only $10,000 with a savings of $20,000 to the property owner.