CASE STUDY: RENOVATION MAKES SENSE – There is a lot to be learned when side-by-side buildings are sold in separate transactions, especially when one commands a $500,000 premium over the other!
Over our careers, we’ve sold dozens of 12-unit buildings. But we have never sold neighboring “sister” buildings within a few months of each other. In this particular case, it is interesting to look closely at the factors that led one property to sell for a half-million dollars more than the other. Characteristics of the buildings are similar, though finishes are different:
• Both were built in 1961
• They have the same unit mix: 11-1Bd/1Ba’s and a studio apartment
• Identical floor plans
• 4 parking spots each
When we sold 1335 MONROE in April, it was neat, clean, and in pretty decent condition. It was an average building for the Congress Park neighborhood, but in part due to the longevity of ownership, its rents had fallen slightly below market to an average of $700 per month. Yet we were able to sell the building above our list price for $1,400,000 – equating to $116,667 per unit.
1345 MONROE, on the other hand, had been completely renovated in 2012. The building had a new high-efficiency heating system, upgraded electrical service and new windows throughout. The apartments had new cabinets, appliances, tile and flooring. Because of its exceptional condition, the building commanded premium rents that averaged $1,040. In large part, because of its exceptional condition and rental income, we sold the building in August for $1,895,000, which equates to $158,000 per unit.
The owner of 1345 Monroe had made an investment of nearly $300,000 for the renovation. After receiving fabulous rents from his tenants for over two years, he also got an extra $500,000 when he sold the building.
Investors often ask us if it makes sense to renovate… It clearly makes dollars and cents!
Greg Johnson (303-343-8333)
Kyle Malnati (303-358-4250)
Madison & Company Properties
1221 S. Clarkson St. #300, Denver, CO 80210