The apartment community was named JFK Manor, after America's murdered president. But in Richmond, Calif., the public housing complex had earned an entirely different moniker to go with those initials: Just For Killers. In fact, things were so bad at the drug-infested, 324-unit complex where gunfire kept residents awake at night that the U.S. Department of Housing and Urban Development had labeled it as the worst public housing community in Northern California. At one point, the agency had nearly given up any hope for turning the project around, and foreclosing on the community seemed a real, if unpalatable, possibility in a tight and notoriously unaffordable rental market.

Daryl Stevens

But then A.F. Evans, an Oakland, Calif.-based developer and manager of both market-rate and affordable housing, showed interest in the property, where it saw a colossal opportunity to turn things around. In 1999, the firm bought the community for $4 million, and over the next two years, it worked to give the complex a complete overhaul. Investing more than $14 million, A.F. Evans hired security guards to combat the criminal element, towed abandoned cars from the parking lot, and re-sodded the packed dirt squares of the courtyards with fresh grass. The firm installed a sparkling swimming pool, razed and rebuilt the community center, and painted exterior walls with bright colors to bring a positive tone back to the property.

A.F. Evans then launched multiple resident programs to make sure the atmosphere didn't revert to its previous state. One initiative offered local teachers half-priced rents in the community, which had been renamed Monterey Pines, if they agreed to participate in an after-school tutoring program for local students. In conjunction with other programs, A.F. Evans says it's giving the property's residents a total services package worth more than $600 monthly per unit. And now, more than five years after its takeover, Monterey Pines is heralded as a national model for tackling problems at a forsaken community.

From a business perspective, it's been a financial success as well. "We've been able to get substantial increases in rental vouchers from the Richmond Housing Authority based on that program," says Bill McClure, A.F. Evans's senior vice president. "It sounds very altruistic, but it's also very good business." With near-capacity occupancy levels, Monterey Pines is now a money-making property for A.F. Evans, generating positive cash flow.

Transforming a community from a war zone into a profitable venture is, of course, a stand-out example of how to add value to a property. But A.F. Evans's approach, and those of other multifamily operators who strive to enhance the worth of communities through physical and operational upgrades, illustrate how properties which may seem undesirable to some firms can, in fact, lead to attractive returns for others. And they're not just at forlorn public housing projects. From small walkups in New York City, to national portfolios of towers and garden-style apartments, experts in adding value to multifamily assets have been able to find ways large and small to make their properties shine–and be more profitable–in the long run.

Yet at the same time, firms that want to grow their portfolios–and the revenues they generate–might not have the choice to do it any other way. With surging sales prices driving down the return that's possible on any given property, and rising construction expenses driving up the replacement cost associated with building from the ground up, finding a dog and making it more palatable for desirable, higher-paying tenants can sometimes be the only viable option.

Even then, some firms have been forced to sit on the sidelines as the flood of capital into the multifamily sector in recent years has driven prices beyond what they're willing–or able–to pay. "We probably haven't bought a property in nearly 10 years," says Jonathan Moore, vice president of business development at Clifton, N.J.-based The Value Group, an owner, operator, and developer that counts 3,500 units under management in the Northeast. "Aside from the big publics, private firms like us have been more discretionary in their capital expenditures."

For those who have been able to find good fixer-uppers, though, there's little mystery in how they've been able to make their money: They work for it. Far from employing exotic measures, these operators have a straightforward approach. They buy smart, make physical and operational improvements to raise their resident profiles, and ultimately increase their rents and the overall value of their asset.

Sounds easy, right? Unfortunately, given today's market, the devil still lives in the multifamily details, and he's not giving his 30-day notice anytime soon.