A case study: transformation of 47 rental units in Del Val
Del Val Real Estate and Property Management (“Del Val”) assumed property management functions for a group of 47 rental units in Philadelphia and New Jersey in 4 separate buildings beginning in August 2015. At the time Del Val assumed control, the buildings they were being managed by a single real estate agent with little or no support.
The buildings had an extensive collection and deferred maintenance issues. When we took over, the buildings were 81% occupied and there was over $150,000 in unpaid rent. Additionally, it took months and even years to understand that the buildings had extensive deferred maintenance and almost all units needed new paint, carpet/flooring, new/upgraded kitchens, and other general improvements. The common hallways also needed work to make them acceptable to tenants. The basements were filled with years of junk and needed extensive cleaning. The exteriors were also dilapidated and needed to be relandscaped.
Del Val took over and began upgrading the vacant units with paint, carpet, and other upgrades. We also spent a lot of time and effort to get all buildings up to code with state and local regulators. We clean exterior areas and extensively clean trash from bases and storage areas. This allowed tenants access to their storage areas and dramatically reduced fire risks.
we then raised the rent from $25 to $50 on any unit we rent. We also give existing tenants a new 2 year lease with rent increases every 3 months to bring rent up to market rates. We have also increased the rent on each lease anniversary.
This process has been going on for over 3 years and here are the results.
financial year 2016 fiscal year 2017 fiscal year 2018
Income $351,000 $385,000 $400,000
Net Income $114,000 $198,000 $270,000
Occupation % 81% 98%
Average Rent $700 $780
As you can see from the above, revenue has improved each year, but the real improvement has been the bottom line. Net income has more than doubled from $114,000 to $270,000. This has been a result of occupancy rate going from 81% to 98% and increasing median rent by more than $80 per unit over the last 3 years. We have also completed many of the deferred maintenance items and now maintenance costs have been reduced by over 50% and that money has gone to the bottom line.
The improved net profit has more than doubled the value of the buildings to the owners.