Renovation marks the third phase in the DiversyFund Growth REIT, after capital raise and acquisition. The unique approach the DiversyFund team takes toward renovating properties helps build wealth while strengthening communities. Learning more about what renovation entails can help you better understand this particular phase in the investment process. Here’s a closer look at the renovation phase, including how it is implemented and what it means for the investor.
Renovation involves improving a real estate property, though there are many different types of renovation a REIT can use to help realize an asset’s full growth potential. Some renovations involve critical repairs, such as repairing a leaky roof or fixing a cracked or settling foundation. Other renovations provide quality-of-life improvements or aesthetic upgrades. These repairs are typically referred to as value-adds, as they literally add value to a real estate property through increased curb appeal or upgraded amenities.
A REIT – like DiversyFund – investing in multifamily rental properties will look for different ways to upgrade its assets. Critical repairs, or those repairs needed to maintain livability, take higher priority. The REIT will analyze each property in its portfolio to determine the steps needed to renovate properties and ensure the rental units are both safe and desirable for tenants.
After critical repairs are addressed, the REIT can move on to value-add implementation. Value-adds might include replacing plumbing and plumbing fixtures, upgrading appliances, installing new light fixtures, or installing new windows for better energy efficiency. These types of repairs help improve the quality of life for residents, and they also make the property an attractive choice for prospective renters in the area. Security upgrades, including motion lights, outdoor cameras, and new locks, protect the property as well as the residents themselves. When choosing value-add projects, DiversyFund weighs the needs of current and future residents with the cost of upgrades to ensure each decision is fiscally sound and a reflection of community needs.
Property management is essential for multifamily assets in any REITs portfolio. Research shows that tenants who are happy with their property management services are three times more likely to renew their leases. DiversyFund ensures professional management is visible onsite at each property, giving tenants added peace of mind while also protecting the asset against potential issues. REIT investors can enjoy the benefits of investing in the real estate market without having to serve in a landlord capacity, as the management takes on all the responsibilities normally associated with being a landlord. A property manager is tasked with ensuring ongoing maintenance is performed, as well as handling rent collection, onboarding new tenants, and handling day-to-day operations. Additional responsibilities of professional property management might include:
Handling maintenance requests
Preparing units for showings to potential tenants
Ensuring public services, such as trash collection, run smoothly
Meet local regulations for building code compliance and other laws
With professional management onsite at each property, the assets in the REIT’s portfolio receive personalized attention to help ensure profitability and dependable cash flow.
Some renovations go beyond making each individual unit more comfortable. DiversyFund looks to strengthen its ties to local communities by implementing value-add strategies to improve the lives of residents. Adding or revamping community centers gives tenants a place to host a variety of functions, such as rummage sales, birthday parties, and holiday celebrations. A recent survey of property managers revealed that community spaces are among the top three most desirable amenities for prospective tenants. Some properties may enjoy the use of brand-new playground facilities to encourage a safe, family-friendly atmosphere in the community, and others can benefit from beautiful landscaping and renovated walkways to add beauty to the surroundings.
These types of renovations serve several purposes; they increase the value of the asset, make the property more desirable to prospective tenants, and help improve tenant retention. When these three purposes are met, a multifamily rental property can provide better profitability for the REIT and create a wonderful place for residents to call home.
Renovation Benefits for the Investor
So how does the renovation phase of a REIT benefit the individual investor? As discussed above, it removes the landlord responsibilities from real estate investors, leaving you free to enjoy passive income and create a smart long-term growth strategy. Investing in a REIT like DiversyFund with a proven renovation strategy also lets you feel good about investing in real estate. You can rest assured that each property is professionally managed and receives the appropriate repairs to help foster long-term relationships with tenants.
Unlike some of the other phases of a REIT’s lifecycle, renovation is ongoing. It overlaps with the next phases, as management, repairs, and maintenance continue for as long as an asset is in the REIT’s portfolio. If you’re interested in learning more about the next phase, we’ll be covering Phase 4: Cash-Flowing in the next blog post in this series.
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