March 29, 2023

5 Tips on How to Optimize the Value of an Income Property

For many real estate investors, managing a multi-unit building is a lot like running a business. The goal: find a way to increase revenues while reducing expenses so that their investment grows. Here are five tips for optimizing the value of a plex, including advice on rental units, unused space, tenant services, as well as energy and supplier costs.


1. Renovate the rental units

When prospective tenants select an apartment, they are also choosing their future living environment. With this in mind, improve the physical condition of your income property since the unit’s appearance is key when it comes to attracting good candidates.

Improvements can be of an aesthetic nature, such as a fresh coat of paint, new floor coverings or even refaced kitchen cabinets. You can also choose to undertake more extensive renovations. For instance, you could remove walls to create an open floor plan or completely renovate a bathroom. However, these changes should be done with the goal of attracting prospective tenants who are willing to pay more for a quality living space. The renovations should also reduce the cost of urgent repairs. In short, you can kill two birds with one stone!

Nevertheless, it is recommended that you calculate the potential return on your investment before determining the scope of the work. For example, how much can you realistically increase the rent after renovations? According to Yvan Cournoyer, real estate expert, to be profitable, the amount invested in renovations should ideally be recovered in less than 36 months.[1]

One slight note of caution: Section “G” of the lease. According to this clause, the landlord must provide the new tenant with a notice indicating the lowest rent paid for an apartment in the preceding twelve months. In the event of non-disclosure, tenants may assert their rights with the Tribunal administratif du logement. In other words, think twice before drastically raising the rent.

2. Repurpose unused space

Some income properties have rental potential that is not exploited to its fair value. However, you can change this situation by repurposing unused spaces. Here are some possibilities:

  • convert the basement into an apartment
  • divide an apartment into two smaller rental units
  • add additional storage spaces
  • add an extension to the building if the lot is large enough

As this work will most likely be costly, first check with your municipality’s urban planning department to see if it is allowed. Also, consult a financial advisor for help assessing the return on your investment.

3. Offer more services to tenants

Offering different services to your tenants is a good way to set you apart from the competition, while at the same time, bringing in more income. For instance, you could set up a coin-operated laundry room in the building, or install a washer and dryer in each apartment as part of negotiations for a rent increase. You could also offer additional parking spaces or storage. In addition, the presence of wireless Internet or a wall-mounted air conditioner will undoubtedly appeal to many renters.

4. Reduce energy costs

Simple changes will help you reduce your electricity or heating bill, while improving the building's energy efficiency. To reduce your expenses, consider:[2]

  • installing led bulbs in common areas
  • using programmable timers for night lighting
  • opting for programmable electronic thermostats
  • caulking all windows
  • replacing doors and windows
  • improving the building’s insulation
  • upgrading the central heating system
  • converting your primary energy source

While, unfortunately, it’s not possible to renegotiate your electricity, natural gas or fuel oil rates, there do exist loans and subsidies available to multi-unit building owners who wish to reduce their energy consumption.[3]

5. Negotiate with your service providers

In addition to increasing income, optimizing expenses is a good way to make a real estate investment profitable. Home insurance premiums, snow removal, landscaping, maintenance services are all areas where you can reduce management costs.

According to Yvan Cournoyer, a few hundred dollars in net income can quickly turn into added value for your property. “As an example, an increase of $1,000 per year in net income will increase the value of your building by approximately $20,000, depending on the region in which it is located,”[4] he wrote in La Presse.

Rent prices – like housing prices – have risen significantly in recent years. For many owners, the current real estate market environment has allowed them to create value. Do you need a hand in identifying plexes with good investment potential? Team up with a real estate broker to help guide you in your search.


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