In speaking with Edgewater landlords and reviewing rent rolls, I’ve noticed that vintage studio apartments are underpriced for today’s market. Many landlords have told me there is no way for them to break $1,000 per month for a studio, and I would like to detail why that rent is achievable.
Rise in Demand
Edgewater is experiencing an increase in new apartment developments and gut-renovations. The Edge at 5910 Sheridan has studios renting for up to $1,328. The District @ Sheridan has studios renting for up to $1,337. The Windale at 6019 N Winthrop Ave. has micro-unit studios renting up to $1,100, and 6149 N. Broadway Ave. is projecting to rent studios for $1,300+ per month. It’s also worth noting that Arcade Residences at 1135 W Sheridan Rd. are renting 1br/1ba units between $1,692-$2,009 and does not offer studios. Throughout the city, people are paying a premium to live alone.
Updating the Unit Strategy
To achieve $1,000 a month for your vintage studio apartment, you do not need to gut rehab the entire unit. Simple updates such as making a studio feel like a one-bedroom is appealing to renters.
It is well-established at this point in time that certain amenities boost rent (think in-unit laundry), but simple changes can improve the “feel” of the unit. Paint an accent wall, put in a new light fixture, upgrade blinds, paint the existing cabinets, and stain the existing wood floors. These are quick, easy, and inexpensive upgrades that will produce higher rents.
Appealing to Today’s Renter
Using and implementing technology is key to winning higher-paying renters. Posting your studio on many internet listing services will drive more traffic and competition to units and ultimately result in higher rent. A new ILS is Facebook. Landlords can list units for rent on their marketplace along with Craigslist, Zillow, Dumo, Zumper and a seemingly endless amount of listing services.
There are some technology upgrades that vintage landlords should consider. Switching from keys to fobs or smart locks, allowing renters to pay rent online with a credit card and make service requests through an online portal or app are all ways to increase the satisfaction of your renters and be able to charge more rent. Speaking of smart technology, a Nest or other thermostat that can connect to the renters’ cell phone is an underrated amenity by vintage owners. Convenience is key to appeal to higher-paying renters and the ability to adjust the temperature from bed or while out of town is a value add.
Vacancy is Ok
I know so many landlords that have not raised the rent on a long-term tenant in years because they fear the unit being vacant and fear to replace the renter with a bad tenant. It is convenient to just collect the rent and not think about that unit; I get it, but what is the cost of that convenience?
Let’s look at a hypothetical studio renting for $700. That is $8,400 annually. If market rent on it is actually $900, then you are missing out on $2,400 in annual income ($900 X 12 = $10,800). A two-month vacancy is only $1,800 at market rent. It would be better to be vacant for two months, mathematically speaking. Of course, the counter-argument is that a new tenant could be a problem and would result in at least more turnover costs, and now the $600 gain on the year is actually a loss (assuming the extra turnover is more than $600).
Let’s look at a three-year approach then. Keeping that tenant there for three years results in $7,200 of lost income. Let’s subtract $1,000 for turnover cost and two months’ vacancy ($1,800). That leaves us with $5,400 that one could save by raising rents to market and risking vacancy.
Obviously, this is over-simplified and every landlord should operate their building in the manner of his/her choosing; however, it is important to run a cost-benefit analysis every once in a while to see how you can operate more efficiently.
Edgewater studios can achieve over $1,000 a month in rent. If you are interested in a market study for your property to see what rents you can achieve, please give me a call.