The first time a housing court judge in Cleveland came to speak at our local real estate investors association, I expected the usual — eviction procedures, tenant rights, legal warnings. What I got instead was the most useful piece of advice I’ve ever received as a landlord.
He had been on that bench for decades. Seen everything Cleveland’s housing courts could throw at a person. And after an hour and a half of talking, this was his summary: 99% of landlord problems can be eliminated by doing two things. Screening your tenants and taking care of your property.
That’s it. Two things. Most of the chaos that operators deal with — bad tenants, constant maintenance calls, high turnover, properties that bleed cash — traces back to one or both of those being neglected. Fix them and most of the headaches disappear.
But knowing that is only half the battle. The other half is knowing the right order to do everything that follows. And that’s where most value-add investors leave money on the table.
Why Sequence Matters
When you take over a value-add property, you have three groups to manage simultaneously: the building itself, the existing tenants, and the vacant units you need to fill. Most operators attack all three at once and end up doing none of them well.
The sequence we use is deliberate. Every step is done in a specific order for a specific reason, and skipping ahead creates problems that are expensive and slow to fix.
Step 1: Fix the Building First, Fix the Tenants Second
The first thing we do after closing has nothing to do with renovating units or talking to existing tenants. We fix the building.
That means the exterior — roof, foundation, entrances, paint, siding, landscaping, curb appeal. It means fixing any mechanicals that need attention. It means improving or adding amenities. All of this happens before we have a single conversation with the existing tenant base about rent increases or lease renewals.
The reason is simple: lead with value. When we eventually go to the existing tenants and say “we need to adjust your rent to market rate,” we want them to have already seen what kind of operator we are. We’ve fixed the leaks. We’ve made the parking lot look clean. We’ve improved the common areas. We’re demonstrating through our actions that we’re serious operators who take care of their properties, not another absentee landlord squeezing the asset.
When value has been established, the conversation about rent is a lot easier.
A note on amenities: while we’re doing the exterior work, we’re also looking at every unused or underperforming space as a revenue opportunity. Old tennis courts from the 1970s that nobody uses anymore? We’ve converted those into dog parks with turf, clean fencing, and waste bag dispensers. This costs us about $2,000 instead of spending $10,000 to demolish them. It attracts pet owners who pay nonrefundable pet fees and monthly pet rent, which generates significantly more revenue than the space was producing before. Unused basement space becomes storage lockers. Unused bays become pet relief stations. Every square foot should be working.
Step 2: Renovate and Lease the Vacant Units
While the exterior work is happening, we’re also renovating all the vacant units. This is the general contractor’s job. Simultaneously, your property management team is handling any health and safety items for existing tenants. We’re still not talking about renovations, just the things that affect their safety and habitability.
Keep these two streams completely separate. Your GC is focused on vacant units and the exterior. Your management team is focused on occupied units and tenant relations. The moment your GC gets pulled into maintenance calls for occupied units, the vacant unit renovations stall, and every day of delay is a day of lost rent.
When we renovate vacant units, we’re hardening them.
- LVP or LVT flooring instead of carpet. It’s easier to clean, faster to turn, and no shampooing between tenants.
- Granite countertops on white cabinets because granite doesn’t nick, burn, or peel, it looks better than anything else at the price point, and once a tenant has granite they don’t want to go back to laminate.
- Flush-mount globe lights instead of ceiling fans because ceiling fans break, rattle, collect dust, and create maintenance calls.
- Low-flow plumbing fixtures that reduce water bills by 30 to 40% annually.
- LED lighting in every area where you pay the utility bill, which reduces electric costs by 25 to 30%.
We use the same flooring, same paint color, same fixtures across every unit in every building we own. This isn’t just aesthetics, it’s operations. Extra paint from unit one carries over to unit two. If a fixture breaks in unit 14, the replacement matches. And when you’re ordering at portfolio scale, you have real buying power with your vendors.
Once those renovated units are leased up and you’ve gotten back to strong occupancy, you have something important: proof. Renovated units at market rate rents in your own building, fully occupied, with qualified tenants. That’s the foundation for the next conversation.
Step 3: Talk to the Existing Tenant Base
This is the part most investors handle wrong, either by doing it too early, before they’ve demonstrated value, or by treating it like a confrontation instead of a conversation.
Here’s roughly how the conversation goes:
“You’ve been a great tenant. You pay your rent. I really appreciate that. But I need to be honest with you. You’re substantially below market rate. These units are leasing at $900. You’re at $650. I want you to stay. I’m not trying to kick you out. But I need you to meet me in the middle. Is there anything cosmetically you’ve been wanting in your unit?”
Let them tell you what they want. Then make them a deal: if you’ll sign a new lease within about 5% of market rate, we’ll make those improvements while you’re living there. We’ll send the guys in over a couple of days while you’re at work. You’ll come home to a new kitchen or a new bathroom. And we’ll have a long-term tenant who’s seen us invest in their unit and knows we’re operators who follow through.
The math for how much to invest is straightforward: we target about a 20% annual return on whatever we spend. If the rent increase is $25 a month ($300 a year) we’d put up to $1,500 into the unit. If the rent increase is $250 a month ($3,000 a year) we’d put up to $15,000 into the unit. A full interior renovation of a one or two-bedroom unit (flooring, paint, fixtures, bathroom, kitchen) typically runs about $10,000, so if you can get a $100-$150 rent increase, the math works.
Expect about 20-30% of existing tenants to choose not to renew rather than accept a market rate adjustment. That’s fine. When those units turn over, you renovate them fully with your standard finishes and lease them to new qualified tenants. The 70-80% who stay have now signed new leases at market rate and had improvements made to their units. Everyone’s aligned.
Step 4: Do the Hallways Last
After all the units are renovated, all the contractors are done, and nobody is dragging drywall and equipment through the building anymore, that’s when we do the hallway flooring and common area finishes.
Not before.
If you do hallways in the middle of the renovation process, they’ll be destroyed by the time the renovation is done. You’re just doing the work twice.
The Standard We’re Chasing
The goal of this entire process is to have the nicest units in the market at market rate rents. Not premium rents. I’m not trying to charge a premium over everything else in the area. I want to charge exactly what everyone else is charging, and then have prospective tenants walk through our building and be genuinely surprised that they can get this quality at that price.
When you do that, you get the most qualified applicants. Qualified tenants take care of the unit, pay their rent on time, and don’t leave because they know they’re getting a deal. Turnover is your highest ongoing expense in rental real estate. Everything in this sequence is designed to minimize it.
Smart Management helps operators track every unit’s renovation status, lease-up progress, and tenant renewal conversations in one place, so nothing slips through the cracks during a value-add. See how it works.
This post reflects my personal experience acquiring and renovating multifamily properties across the US. It is not legal or financial advice.