I recently identified a 6 family property that is being mismanaged. The owner paid utilities/expenses are high. On top of that the rents for each apartments are roughly 100-150 under market rents on a conservative side. I am estimating that I am going to be able to raise the NOI roughly 6k-10k annually. My question is what suggestions does everyone have on how to access this newly added value. Preferably at a minimum I would like to be able to pull out my initial investment of 25%.
Appreciate everyone's help!
With the info you provided I would look at it this way.
1. Take care of any deferred maintenance there may be it will be a better sell when you raise rents if the property looks good and the tenants see you care.
2. Implement R.U.B.S if your market will bear it. This reduces your utility cost and in turn will increase your NOI.
3. Raise rents when lease's become due or as vacancies are filled.
4. Negotiate trash, lawn care, cable contracts to reduce cost.
5. After you stabilize the property you will have forced the value up and can refi or heloc it out.
Every dollar you decrease your expense's is a dollar that goes straight to you NOI. (read that again, and again and again) At a 10 cap every $10 saved increase the value by $100. At an 8 cap and that 10 turns into 125. So negotiate every contract and watch for the contractor expense creep. Shop each and every expense out. Ins, Trash, Electric, Blacktop, Lawn care, Snow removal, Gas, propane, oil, everything.
I don't see why not. Keep in mind that 6 units would be a commercial loan, and usually more expensive than a 1-4 unit. Some commercial loans also have prepayment penalties, so factor all of your short term financing costs.
Thank you for thoughts and recommendations! That is what I love about commercial properties is the control you have on the value of the property. Is there any time constraints you know of on how quickly you would be able to heloc our value?