Water Conservation - Overlooked Value-Add Strategy
In a time where multifamily pricing is high, investors are looking for every way possible to maximize the value of their property and get the most out of it. There are some markets where the renovations and rent bumps have already been done so most of the income potential has already been maximized. Another way to add value is to look at the expenses and figure out where savings can be made. Most of the Class B/C properties that we sell have the owners paying a portion of the water bill. Some are all bills paid properties, so this is an even more important strategy for those owners.
SAS Water Conservation will do an analysis based on the number of toilets, shower heads, and aerators. They will replace the toilets with low-flow toilets, replace shower heads with low-flow shower heads, replace supply lines, and replace all the aerators in the kitchen and bathroom faucets. They can even replace the angle stops and base plates as an add-on.
Here are the highlights from a proposal that we received on a property that we’re marketing:
By investing $275/unit, the owner can save approximately 36% off the water bill. On this property, the expenses will decrease by over $15,000, which will improve the NOI by the same amount. The breakeven period to recoup the investment is 15 months. At a 7% cap rate, every dollar saved on an annual basis will yield over $14 extra when it comes time to sell. Finally, many lenders will give a “green” discount and lower your interest rate if you implement this strategy.
Call us if you’re considering this value-add strategy as a way to improve your on-going operations and we’ll refer you to a great company who can help. As always, if you’re considering marketing your property for sale, we’d be glad to put together a market valuation with comps and underwriting to show you what your property will bring in today’s market.