The Capital Stack
This week’s article presents a compelling case study on the significant advantages of installing in-unit laundry facilities across our properties specifically the Donovan Townhomes. We examine how this improvement not only elevates property values but also effectively minimizes vacancy times and enables us to achieve higher rental rates. Our findings underscore the strategic importance of in-unit laundry, illustrating clear returns on investment and increased tenant interest.
Maximize ROI with In-Unit Laundry
Recently, a 2-bedroom, 1-bath unit at the Donovan Townhomes became vacant. Most 2-bedroom units at this property lease for over $1,300. We initially listed the unit at $1,325, but it didn’t lease. After a few weeks and several showings without any success, we decided to lower the rent to $1,250, still without in-unit laundry. However, it still didn’t lease after another few weeks.
Adding laundry would cost around $5,000, as it required breaking into the slab foundation to create a new drain line, running new water lines, and installing venting through the exterior wall. We decided to proceed with the laundry installation. Once completed, the unit leased almost immediately at our full target rent of $1,325.
What We Learned
In-unit laundry is essential. Without it, the unit would likely have been leased for around $1,200, but it would have taken longer to find a tenant. Assuming at least one month of vacancy, this translates to a $1,200 loss.
By spending $5,000 to install laundry, we were able to lease the unit immediately at a $125 premium, bringing in an additional $1,500 per year. This results in a 30% ROI on the $5,000 investment.
Additionally, this investment adds $23,077 in property value at a 6.5% cap rate. When we sell, the $5,000 expense will yield $23,077 in added value. Applying this across the four units without laundry at this property, we can add nearly $100,000 in value for a $20,000 total investment.
In Conclusion
Moving forward, we are committed to installing laundry facilities wherever feasible, recognizing the direct correlation between this amenity and rental income. We’ve learned that units without in-unit laundry present a unique opportunity to significantly enhance property values. By investing in these upgrades, we not only boost rental potential and decrease vacancy periods but also generate a strong return on our investment.
Major Market News
Fisher Family Sells for $27.1 Million
The Fisher family prominent in Detroit society and associated with the landmark Fisher Building sold their longtime lakefront home in Palm Beach for $27.1 million. The sellers, and heirs to the Fisher Body Company, included Michael R. Fisher, Christine Fisher Grow, Judith Fisher Knudsen, and Alfred J. Fisher III. The 5,100-square-foot home at 1010 North Lake Way features five bedrooms, four bathrooms, a pool, a dock, and 110 feet of waterfront. Initially listed for $38 million in 2023, the price was reduced three times before the final sale.
Source: TheRealDeal. (2024, June 18th) Revved up: Auto industry family sells lakefront Palm Beach house for $27M. https://therealdeal.com/miami/2024/06/18/auto-industrys-fisher-family-sells-palm-beach-house-for-27m/
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Terms-
Return on Investment (ROI): ROI is a financial metric used to evaluate the efficiency or profitability of an investment relative to its cost. ROI is typically calculated as a percentage and represents the ratio of net profit or benefit derived from an investment to the initial cost or investment amount.
