Top 7 CapEx Items for Multifamily
If you are looking for ideas on how to get more value out of your rental property this list shows the impact of capital expenditures on investment properties. These are based upon our experience working with hundreds of investors over the last decade. Every market tends to be a little different based upon the tenant pool. We recommend doing your own research which involves comparing your property to others in the area and discussing any CapEx projects with your property manager as they will have heard all of the complaints and requests from tenants in the area.
Ranked by ROI Potential for Raising Rents
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Kitchen and Bathroom Upgrades
- Why? These are high-impact areas for tenants. Modern appliances, updated cabinetry, attractive countertops, and upgraded fixtures in kitchens and bathrooms are among the top reasons tenants are willing to pay a premium.
- ROI Potential: High. A $10,000 kitchen remodel can lead to rent increases of $50-$150/month, depending on the market.
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Energy-Efficient Windows and HVAC Systems
- Why? Tenants value lower utility bills and improved comfort. Energy-efficient systems can also command higher rents by branding your property as sustainable and modern.
- ROI Potential: High to Moderate. Rent increases can range from $30-$75/month per unit in markets where energy savings are significant.
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Flooring Upgrades
- Why? Replacing old carpet with luxury vinyl plank (LVP) or hardwood flooring offers durability and aesthetic appeal, especially in high-traffic areas.
- ROI Potential: High to Moderate. Attractive, low-maintenance flooring can increase rents by $25-$75/month per unit.
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Exterior Improvements (Curb Appeal)
- Why? First impressions matter. Enhancements like landscaping, fresh paint, or modernizing the building façade attract better tenants and justify premium rents.
- ROI Potential: Moderate. While it’s less direct than interior upgrades, improved curb appeal can reduce vacancy rates and slightly increase rents.
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Lighting and Electrical Upgrades
- Why? Bright, energy-efficient LED lighting, along with upgraded outlets or smart home features, modernizes the property and enhances the tenant experience.
- ROI Potential: Moderate. These upgrades typically command an additional $15-$40/month in rent, especially for younger tenants or tech-savvy professionals.
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Laundry Facilities or In-Unit Washer/Dryer Additions
- Why? Convenience is a top priority for tenants. Adding in-unit laundry can significantly increase perceived value, especially in markets with few properties offering this feature.
- ROI Potential: Moderate. Rent increases can range from $40-$100/month per unit.
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Shared Amenities (Fitness Rooms, Playgrounds, or Common Areas)
- Why? While shared amenities can justify higher rents, their ROI depends on the demographics of your tenants and the size of the property.
- ROI Potential: Moderate to Low. Rent increases can be $10-$50/month per unit, but upfront costs are substantial, and usage varies by tenant type.
Compliance-Driven CapEx Items
These expenses may not directly impact your ability to raise rents but are essential for maintaining compliance, avoiding fines, and ensuring tenant safety. Neglecting these can result in legal liabilities or a loss of occupancy permits. It is never recommended that you allow a property to fall into the type of disrepair that causes unsafe living environments for your tenants. While these expenditures are often mandatory, addressing them protects the property’s reputation and ensures tenant retention, which indirectly supports long-term rental income stability.
- Mold Remediation
- Fire Safety (Sprinklers, Alarms, Fire Escapes)
- Plumbing or Electrical Repairs for Code Compliance
- ADA Accessibility Modifications
- Roof Repairs or Replacement
- Asbestos or Lead Paint Abatement
- Foundation Repairs
Final Thoughts:
To maximize the impact of capital expenditures on investment properties focus on CapEx items that create a noticeable improvement in tenant satisfaction and willingness to pay higher rents. Balance these upgrades with compliance expenditures to ensure your property remains a competitive, safe, and legally compliant investment.
