Apartment Building Rehab

Has anyone ever rehabbed an apartment building? I located a 20+ unit in need of a rehab and wanted to know what to expect. What are some things I should be aware of? Is the process that different from rehabbing a single family home?

Edited: 06/26/2010 at 05:46AM

Tyra General

Real Estate Investor · Maryland

103 posts
133 Influence
1 Award

Icon_minipost Aug 26 '08, 01:33 AM

Damien,

I have never done any rehabs, but am in the DC Metro area and may be able to refer you to a good place to find some assistance with this.

If you'd like to chat. Contact me.

God Bless,

Tyra

Edited: 06/26/2010 at 05:46AM

Account Closed

805 posts
380 Influence
2 Awards

Icon_minipost Aug 26 '08, 03:21 AM

Damien,

The most important steps to take early are to develop a good relationship with the building code enforcement office. They are very strict when it comes to any kind of commercial construction or rehab.

The other thing to do really early is get the fire marshal in to walk the property as soon as possible. Complying with the fire codes is not all that expensive if you get them involved early.

Another is don't let your contract quote time and materials by unit. There are economies of scale that should work in your favor. The materials to rehab 20 units individually will be higher (sometimes 15% or more) than the cost of enough materials to cover them all at once. A lot of builders count on apartment owners not keeping tabs on the left over materials between units.

If you are also managing the project, get the in the habit early of walking the site with the contractor's project manager every working day. Yes, that means if they are working on Saturday, you walk it that day too. This is the best way to head off problems when they are small, easy to fix and the least costly.

Good luck and keep us informed of the progress!

Edited: 06/26/2010 at 05:46AM

Damien Hall

Real Estate Investor · Washington, Washington D.C.

72 posts
193 Influence
1 Award

Icon_minipost Aug 26 '08, 03:52 AM

Taz:

Thx for that!

Should I get the fire marshall and the code enforcement office involved before I make an offer or after. Maybe ask them some questions and possibly get the fire marshall to walk the site with me now.

This is my first commerical project so I'm trying to order my steps and become as prepared as possible. So far I've completed the demographics of the area, I've gotten a feel for the rental market and I've gotten my contractors to view the site with me. What would you advise next?

I want to make sure I'm prepared before making an offer, but I don't want to pull the cart before the horse.

Edited: 06/26/2010 at 05:46AM

Jon Holdman

Real Estate Investor · Denver, Colorado

11859 posts
75547 Influence
15 Awards

Icon_minipost Aug 26 '08, 04:46 AM

I'd certainly get them involved during your due diligence period. With a building that large, I would think you would do most of your inspections during the due diligence period, rather than prior to making an offer.

Building codes are different for large buildings like this than for SFRs. You're going to be held to a higher standard by the authorities. Make your offer based on what you see, but if the inspector or fire marshal points out something major, request an adjustment.

Edited: 06/26/2010 at 05:46AM

Jon Holdman, Flying Phoenix LLC

Account Closed

805 posts
380 Influence
2 Awards

Icon_minipost Aug 26 '08, 04:46 AM

Originally posted by Damien Hall

Taz:

Thx for that!

You are quite welcome.

Should I get the fire marshall and the code enforcement office involved before I make an offer or after. Maybe ask them some questions and possibly get the fire marshall to walk the site with me now.

If this is the one you were talking about in another thread that had been abandoned for 8 years, I definitely talk to the code enforcement office and see what they know about it. I have had great response from fire marshals even before making an offer. Their interest is in public safety and they are eager to work with anyone who makes it easier to do their job.

This is my first commerical project so I'm trying to order my steps and become as prepared as possible. So far I've completed the demographics of the area, I've gotten a feel for the rental market and I've gotten my contractors to view the site with me. What would you advise next?

I'd sit down and put together a draft LOI and a plan for the property. What will you be doing while the rehab is happening? At what stage in the rehab will you start to market the property for rent and/or sale?

I want to make sure I'm prepared before making an offer, but I don't want to pull the cart before the horse.

It sounds like you are doing fine. When your construction guy walked the property did you go in every unit and inspect all of the mechanical systems? I know it was abandoned, but it is one thing to replace a vandalized hvac system, it is something entirely different to find out all the copper throughout the building is gone.

Edited: 06/26/2010 at 05:46AM

Damien Hall

Real Estate Investor · Washington, Washington D.C.

72 posts
193 Influence
1 Award

Icon_minipost Aug 26 '08, 08:07 AM

Originally posted by Wheatie

Building codes are different for large buildings like this than for SFRs. You're going to be held to a higher standard by the authorities. Make your offer based on what you see, but if the inspector or fire marshal points out something major, request an adjustment.c

Thx Wheatie! That makes sense!

Originally posted by Taz
If this is the one you were talking about in another thread that had been abandoned for 8 years, I definitely talk to the code enforcement office and see what they know about it. I have had great response from fire marshals even before making an offer. Their interest is in public safety and they are eager to work with anyone who makes it easier to do their job.

Yep... this is the same building. I'll get them involved as early as possible. If the seller has any issues then I will do what Wheatie suggests and make adjustments if anything comes up during the due diligence period.

Originally posted by Taz
When your construction guy walked the property did you go in every unit and inspect all of the mechanical systems? I know it was abandoned, but it is one thing to replace a vandalized hvac system, it is something entirely different to find out all the copper throughout the building is gone.

We did walk thru all the units. The building has copper piping so that was a good thing. However each unit doesn't have individual mechanical systems. The whole building ran off a furnace and a water heater both located in the basement. As I'm thinking about it, there were no thermostats in the units either. All of this will have to be installed. Sounds costly!

My initial idea was to keep them as rentals and sell in a few years. If I can get the building at the right price, but the rehab cost is high, a condo conversion may be an option.

I don't know... But thanks for the advice. I have some things to consider and a way forward. I'll keep you guys posted.

Edited: 06/26/2010 at 05:46AM

Jon Holdman

Real Estate Investor · Denver, Colorado

11859 posts
75547 Influence
15 Awards

Icon_minipost Aug 26 '08, 08:21 AM

What type of heat is it? If there's a boiler, and a hot water heat line to each unit (pretty common, from what I've seen), then if there isn't a valve on each unit connected to a thermostat, it shouldn't be too hard to add that. There must be some thermostat somewhere. If you're going down that route, you might look at some sort of RUBS (residential utility billback system) so you can bill each unit for their heat. I can't imagine one huge force air system for 20+ units. If its steam heat, each radiator would have some sort of control.

Didn't realize this was an empty building. If its been empty that long, it may not have a certificate of occupancy. Unlike an occupied building, you may have to bring it fully up to current codes to get a new CO. I'd definitely have a chat with the building department. I've found them (and planning commissions, which would also be worth a chat) to be more than willing to tell you want they expect, and pretty easy to work with if you're trying to do the right thing. Plus, better to find out about some big problem before its your problelm.

Edited: 06/26/2010 at 05:46AM

Jon Holdman, Flying Phoenix LLC