As America’s population continues to grow, property developers are having a difficult time finding space to accommodate eager renters. Now, with the emergence of micro-apartments, property developers may have found a solution.
Micro-apartments are becoming more and more common in population-dense cities like Chicago, Boston, San Francisco and New York City. Typically located in popular neighborhoods, micro-apartments meet the needs of middle-class, single, young renters who want to be close to urban centers but would not otherwise be able to afford the price tag that comes with these areas of town.
Smaller Is Better
Besides meeting the needs of renters, micro-apartments can benefit property owners and developers by increasing the number of rentals in their portfolio and their total revenue. Property owners can achieve this by converting their current apartments into micro-apartments – or developers can consider developing properties to be used for micro-units.
Take New York City for example: the increasing popularity of micro-apartments spurred Mayor Bloomberg to change the minimum living space requirement to 250 square feet. Seeing as the average one-bedroom apartment in New York City is 750 square feet, a property owner could take that one-bedroom apartment and create three individual units.
While these micro-apartments will come with a lower monthly rent, property owners will make up for it as they’ll have more units to market. In San Francisco, some micro-apartments are listed for $1,600 a month. This price tag may seem high given the reduced amount of space, but when compared to the average rent in the city – $2,741 a month – micro-apartments are actually quite a deal.
By looking at both of these examples, a property owner can end up with three units bringing in a total of $4,800 per month, which is $2,000 more than what one unit could bring in.
What’s more, micro-apartments don’t necessarily have to be confined to just renovated apartments. In Chicago, property developers are creating micro-apartment communities out of foreclosed flophouses.
Some developers are even using micro-apartments as a way to preserve historic buildings. In Providence, Rhode Island, architects took an old mall that was considered one of the most endangered buildings by the Providence Preservation Society and transformed it into a 48-micro-apartment development.
Factors to Consider
Before jumping into a full-blown construction project, there are a few factors property owners need to consider.
First off, the cost of converting any kind of building into micro-apartments can add up very quickly. As these units will be very compact, they will need to be designed well to accommodate all the needs of renters without making them feel as if they live in shoebox. And since the units will be under construction, property owners will not be collecting rental income.
Additionally, property ownerrs need to be sure they have the ability to take care of all their new micro-apartments. Two or three times as many units means more maintenance needs and more renters who will require more attention and administrative duties.
Location can also be a deal breaker. In order to be successful with micro-apartments, it’s vital that prospective building be in a city experiencing mass growth and in a part of town that is highly coveted by single, young people looking to live in the center of the action.
With the right location, financial plan and target demographic, micro-apartments can be a great option for property owners looking to expand and improve their portfolios.
This is a guest submission by Holly Aker, of Austin-based Software Advice. Software Advice provides free reviews, comparisons, and demos of property management software. The company also maintains a blog about current industry news and developments.