Multi-Family Renovation and Rehabilitation
When it comes to getting into home remodeling, and home building, multi-family properties and rehabilitation projects have been some of the most difficult and highly involved construction projects around, while also being quite lucrative from a business sense, and can lead to both a comfortable family living space, as well as an opportunity to create cashflow via rental properties and selling homes.
While the world of DIY home renovations has become quite popular recently, when it comes to multi-family properties, commercial dwelling and rehab projects, it definitely takes far more of a professional touch as things are not only difficult but they take quite a bit of experience to make sure everything is done correctly. According to the team at Realty Improvement, for those families and individuals who are in need of largescale home renovations and rehab work, while it might be difficult, in the long term it can be quite worth it and it can truly increase your homes property value.
Here are Some Important Things to Know About Your Next Multi-Family Rehab Project
Planning & Pre-Planning
This is definitely vital, as nothing truly works without a plan and the team at Realty Improvement can help you to better flush your plan out and bring it to life. Especially if your planning to turn this into a business, and add value to these properties. The most critical assumptions when formulating your business plan are:
- What updates are needed?
- What is the cost of these updates?
- What rental premium can they generate?
If you are thinking about installing hard surfaces, stainless steel appliances, and upgrading common area carpet and lighting, find comps that have done the same, and see what they are getting in rent.
- Was built in the same decade
- Has similar amenities
- Is in a similar location
Once you make the big picture plan, it is time to get more detailed. These details include:
- The cost of the new updates for each floor-plan (for both vintage and previously renovated units)
- How many years will it take to renovate all the units (how many can you renovate each month?)
- How long will the units be vacant while renovating them? One month? Two months?
- The average return on cost (return on investment) for the renovation plan.
Some other Things to Expect Include:
- Hidden Expenses
There are a few cons when renovating a fixer-upper property. The most common are the hidden expenses that reveal themselves when a wall is opened up or the electrical wiring is replaced. As an investor, it’s often very hard to estimate renovation costs. Especially since they will always be more than your contractor estimate no matter what is written in the contract. The second problem is that it can often take a considerable amount of time to complete the renovation. During this time the increased vacancy – especially if the entire fixer-upper property is renovated at once, can make it harder to turn a profit.
Upgrading for Modern Amenities
The second type of improvements you can make on multifamily properties are upgrades. Upgrades involve adding amenities to a property and can range the very basic – like added parking- to luxurious, such as rooftop infinity pools complete with large screen TV’s, pizza ovens, and cabanas. Rather than randomly installing upgrades, it’s best to first survey tenants or ask fixer-upper property managers what type of amenities would be appropriate for tenants. Right now, the trend is for buildings that offer live/work/play areas (for millennials) or are close to urban centers (empty-nesters). Many fixer-upper property owners are choosing to upgrade by adding amenities for those who want affordability with a dose of luxury. Common areas that look more like hotel lobbies, private workspaces connected to Wifi, pet grooming or extensive exercise centers are just a few of the amenities being offered.
- The Most Common Mistake for Rehab Work & Renovations
The most common mistake investors make when upgrading a fixer-upper property is failing to upgrade based on the tenants’ lifestyles. If you own a Class B or C building, it’s unlikely your tenants will want luxurious amenities since those will cost an extra several hundred dollars a year more. Even if your tenants can afford better amenities, adding the wrong amenities can fail to add value. But it can also anger tenants, who feel the money should have been spent on more important projects. And lastly, as with renovation, be sure the rent bump you obtain from an upgrade will last long enough for you to recover the amount spent and gain profit. There’s nothing more frustrating than spending thousands of dollars on an upgrade only to find your costs won’t be recouped for another ten to twelve years.
For more information on all there it to know about any multi-family renovation, and home building project, be sure to contact Realty Improvement today.