Is it possible for me to update a multi family,8 units, from outside. All Units are rented. I mean new fences, painting, fixing the pavement, adding car port and still get a good appraisal so I could get my money back?
Commercial properties are valued based on net operating income. It sounds like this plan does not include increasing the rents and/or decreasing expenses, so it is unlikely this type of thing would move the property value.
That's one of the issues with buying older commercial properties. Most will need pricey repairs that do not increase the NOI.
To me, all of those items together would increase the rent. and thus NOI and debt. The question is, how much will that cost?
Covered parking is almost always worth it, people pay to protect their cars!
@Thiago Oliveira Definitely. Condition of the property is considered in appraisals. You'll also be able to charge a monthly fee to use the car port, which increases NOI.
It would also show well if you have at least 1 new lease after you complete the upgrades with an increase in rent. This proves you not only improved the property's condition but it will improve expected rents.
@Thiago Oliveira Yes. The cycle might be a bit longer however. As @Taylor L. mentioned, rent increases, expense decreases and renovations drive a higher valuation. This is because they increase the overall income the property generates and ultimately how multifamily is valued.
Regardless, A BRRRR benefits from increased value in which the increased value is adequate whereby a percentage(30% for example) can pay for the money invested for purchase + renovations. Thus allowing you the investor to walk away whistling dixie.
However, in any unit count over say a quad, the cycle, the time it takes to raise rents, renovate and decrease expenses increases. Makes sense right? The more units, the longer it takes to end leases, renovate and re-lease those units.
Therefore, yes, you can do it, however it will take more time and holding costs or time spent need to be considered. Many large apartment syndications do just this strategy by refinancing in year 3 on a 5 year plan. Simply because at year 3, most of the plan will be completed. A very large BRRRR if you will.
Thanks guys. I really appreciate that. Always learning great stuff in this forum.
You guys are awesome!!!