Reduce Rehab Costs with Multifamily Buildings

If rehabbing a regular building is stressful, then rehabbing a vacant building is even more stressful. Not only do you have holding costs, but you also have to secure the building. Unfortunately, these types of costs can quickly multiply and drain your pockets. This is why I like to rehab multi-family unit properties. Since I can rent units while rehabbing, this cuts down on cost that are normally associated with vacant buildings, which results in more bang for your buck.

What are costs associated with rehabbing vacant buildings? There are many and they aren’t cheap. First, there’s the cost of securing the building. Sadly enough, empty job sites are very attractive to thieves. I’ve had a job site broken into, but it wasn’tlooted by professionals, which means there wasn’t a lot damage. I had to purchase a security dog for the remainder of the rehab, luckily it wasn’t that long.

In addition to the aforementioned, the following are other costs associated with rehabbing vacant building costs:

➢ Electric

➢ Heating

➢ Water

➢ Various Loan costs

➢ Property Taxes

➢ Property Maintenance

These costs are ongoing, and they add up quickly. What should be the plan of action to reduce or eliminate costs?

Personally, I would inspect each unit and rehab the unit that needs the least amount of work…first. Rehab and rent this unit as quickly as possible. This will generate income fastest. Use the same logic to rehab the remaining units. The unit that requires the most amount of work should be rehabbed last. Next, I would concentrate on the common and exterior areas of the property. Remember, never rent an unfinished unit. But then again, most governments will not issue occupancy permits until a property is finished and safe to enter. So, rehab and plan accordingly.

This plan of action may not be doable for all types of situations. But all in all, it could possibly save thousands of dollars in holding and vacant building costs. This keeps more money in your pocket.

Yes, this is a good strategy, but it might not work in all scenarios. For instance, what if there are already tenants in the building? What’s your plan of action? If the renters are renting month to month, you could end their leases and give them 30-day notices. I prefer giving 90-day notices, with the offer of a financial reward if they move sooner. If they are leasing for a year or have a term lease, then offer them cash for keys. Unfortunately, if these things don’t work, you might have to wait until the leases are up, so make sure you factor that into your investment decision.

If you have difficult tenants that are hard to get rid of, use the cash for keys strategy. Once, I took a difficult tenant’s rent and told him that if he left within 30 days, I would give him the rent back. What happened? Let’s just say I never had to deal with him again. The cash for keys strategy is a good way to entice unsavory tenants.

Unfortunately, there are problems associated with being a landlord during a rehab. People are always complaining about noise levels, and of course, you may have to evict tenants. It happens, and I try to find ways to handle these problems effectively. What works best for me? I think about the finished rehab and the bottom line. This makes it all worthwhile in the end.

Holding costs during a rehab can be expensive, especially if the building is unoccupied. This is why you should consider rehabbing a multi-family unit building. It gets you a better return. Rehab the units with the least amount of damage first to generate income quickly. Also, keep in mind, when it comes to investing in multi-family properties, tenants can bring great rewards and cause problems all at the same time.