In-Unit Washer and Dryer in Apartments: Is the Rent Premium Worth the Cost?
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Many apartment buildings have a shared laundry room. A value-add plan may put a washer and dryer in each unit, which residents often value and which can support a higher rent. The question for a sponsor is not whether residents like it. It is whether the rent they pay for it returns the cost within a reasonable time, after the upkeep the machines add.
This guide shows how to measure the rent premium, how to build the per-unit cost and how to calculate payback for one unit and for the whole building. It is not advice on plumbing or electrical codes. A licensed contractor should confirm the water and electrical work in each unit.
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What does an in-unit set cost?
- The machines. A washer and dryer set, with a warranty, bought new or in quality used condition.
- Delivery and installation. Hauling, leveling and connection to the water and drain.
- Hookups. Where a unit has no water supply or drain at the right place, the plumbing is the largest line.
- Electrical work. A dryer usually needs its own circuit and sometimes a gas line, depending on the machine.
- Vent and fire safety. The dryer vent must run outside the building. Check the local code and the vent length.
- Upkeep. Parts, service calls and a repair reserve for the machines, each year.
How do you measure the rent premium?
Find units in the building or in nearby buildings with the same floor plan and no in-unit machines. Compare the asking rent and the leased rent over the last six months, and count only the difference that holds after concessions. A premium supported by two listings is a guess. A premium supported by leases on the same floor plan is evidence. Read the net effective rent guide before you count a concession as income.
Hypothetical example
These figures are made up for illustration. Get the install quote for each floor plan and the comparable leases before you commit.
Suppose a building of 30 units can install a set in each unit for $3,200 per unit, including the hookups in the units that need them. The owner tests a $45 monthly premium on comparable leases, which is $540 a year per unit. Upkeep and the repair reserve are $120 a year per unit. The net yearly gain per unit is $420.
| Measure | Per unit | Whole building (30 units) |
|---|---|---|
| Install cost | $3,200 | $96,000 |
| Premium at $45 a month | $540 a year | $16,200 a year |
| Upkeep | $120 a year | $3,600 a year |
| Net yearly gain | $420 | $12,600 |
| Payback | 7.6 years | 7.6 years |
If the premium is only $30 a month, the net gain falls to $240 a year per unit, and the payback stretches to about 13.3 years. If the premium is zero, the payback never comes, and the capital is spent for convenience. The plan should show all three cases, so investors see the range and not just the best one.
Does the value-add hold up?
The payback is only part of the test. Check whether the premium holds when the building re-leases, whether the machines raise the water and electric use the owner pays, and whether the work pulls units off the market for several weeks. A value-add that takes six weeks per unit to install costs rent during those weeks, and that cost belongs in the schedule. The renovation pace guide shows how to count the time.
What should you check before you commit?
- Each floor plan's plumbing and electrical access, from a contractor walk-through.
- The comparable leases on the same floor plan, with concessions removed.
- The water heater and drain capacity for the added load.
- The dryer vent route and the fire-safety rules for it.
- The lease language on appliances, the owner's responsibility for repairs and the resident's responsibility for damage.
- The insurance policy's coverage for water damage from appliances.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units under Rule 506(b) or 506(c). The deal's renovation budget and its rent assumptions show the install cost and the premium, so investors see both numbers and the loss case. DoorRaise does not install appliances or set rents for a property. Setup is $1,500 (non-refundable), and the administration fee is $5,000 a year from closing.
Start with a sponsor page or see the fees.
FAQ
Is an in-unit washer and dryer worth it in every building?
No. It depends on the hookups, the install cost and whether the rent premium holds in comparable leases. Test each floor plan.
Should the owner or the resident pay the utilities?
That is set in the lease. If the owner pays the water and power for the machines, count that cost in the operating budget.
Does the premium stay the same as the building ages?
Not necessarily. Test the premium each year against new leases, and keep the upkeep reserve for the machines.
Is a shared laundry room still useful?
It can be, especially where in-unit hookups are costly. A shared room can also be a source of other income, which the other income guide explains.
Sources
- Value-add renovation budget per unit, for how to build the per-unit renovation budget.
- Property improvement plan for value-add apartments, for how to rank the upgrades.
- Net effective rent and concessions, for measuring the real rent.
- Example figures are hypothetical. No survey of rent premiums is cited here. Test the premium with leases from your own comparable units.
This article is general information, not legal, tax or investment advice. Talk to a licensed plumber or electrician about the work, a CPA about the tax treatment and a securities attorney about your deal. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.