In the quest for a top dollar return on residential rental space, developers Matt and Seth Weissman of Weissman Equities of New York, N.Y. have hit upon a powerful formula.
“We initially thought that if a studio apartment rents for X-dollars, a micro unit half its size should go for 50 to 60 percent of that. With our property, the discount is just 20 percent. It was a huge eye-opener,” Matt states.
It’s also proving to pay off on a monthly basis. Rather than settle for the prevailing rental rate of $35 per square foot, the Weissmans have quality tenants lined-up to pay nearly $70 per square foot, a 100 percent premium.
The secret behind this rental income multiplier is not only a floor to ceiling rehab of each unit but also the deployment of high-quality, double-duty furnishings that redefine small-space urban living. Stylish, affordable, and surprisingly livable, these units epitomize “Living large with less.”
“We’re blown away by the rents we’re getting. Our business model is to modernize existing SROs (single-resident occupied apartments) for today’s renter and furnish them so they function like an apartment twice the size. We’re telling tenants, ‘Just walk in with a suitcase and call it home.’”
The furniture Seth and Matt selected is far from ordinary. Transforming furniture, like the name suggests, is engineered for multiple purposes. Unlike the Murphy Beds of yore, the Italian-made queen wall bed/sofa combination and desk/dining table from Resource Furniture of New York, N.Y. are engineering marvels of craft, precision, and modern style. The effect on prospective tenants is immediate.
“It’s like the apartment was built for them,” Matt says. Actually it was. Traditional furniture doesn’t work in micro units. Transforming furniture does.
The project, located at 2299 Adam Clayton Powell Jr. Boulevard in Harlem, is a renovation of a 20-unit, four-floor building. The units average about 200 square feet and include a full kitchen, while sharing two and a half bathrooms on each floor (professionally cleaned three times a week). The first five units were delivered in January 2014. All five rented immediately with multiple applications on each. An additional five units will be completed and available in February 2015.
“This is not an easy town to live in, even with a respectable income,” Seth says. “People who rent don’t look at what they’re paying per square foot. Tenants worry more about ‘Can I afford the monthly rent?’ A 500 square foot studio apartment going for $40 per square foot grosses-out to a rent many can’t afford. These units offer a lower monthly payment with qualified amenities in a good location. Tenants use the savings to enjoy New York. It’s a win-win for all.”
The Weissmans credit Resource Furniture for simplifying the design process. “They’ve been great. We’ve collaborated with them from the time we had the building plans. They provide renderings, suggest layouts, spec finishes, deliver, and carefully install. They even include a five-year warranty. We’ve been here a year now and haven’t had a furniture issue,” Matt observes.
Are the Weissmans looking to duplicate their Harlem success? “Absolutely. We’re value-added multifamily real estate investors,” Matt says. “We plan on applying the same development strategy to additional buildings in other neighborhoods. We’re always looking for the right situation. We now know small spaces can behave large and deliver exceptional value for everyone.
“There’s an unquestionable demand for fully-furnished micro units. And we plan on supplying them.”