Multifamily Value Add Upside

[Joseph Windham]

Hey guys, I am an aspiring multifamily investor looking to sharpen my axe at the underwriting process. I wanted to know if there were any tools or advice you guys use to come up with how much value you can add to the property. I am very detail oriented and like to have precise numbers, I understand it may not be nice and clean cut like I like it, but I am struggling with how I can ballpark the cost/upside of renovations.

[David Lilley]

Look for comparable properties (same age) with new finishes the same quality as what you would use. What rents are they achieving? This will be your post-renovated rent number. Now, what cap rate are comparable properties selling for in that area?

You should have your new net income using your post-renovated rent numbers. Take New NOI divided by cap rate = New Value. ($200,000 / 0.06 = 3,333,333)