Thorndale, PA · Member since 2017 · 68 posts · 15 votes
I am new to BP and my goal is to buy value add properties with at least 16 units or more. How do you calculate the cost per unit, what are some things that you look to improve in a value add property and how do you know if it will be worth it or not? I'm not looking to do a total rehab of the properties I just want to add some simple things to increase the value if thats possible. Thanks!
A multi-unit property is a business. As a business, it is valued based upon the amount of cash flow it produces and perhaps, to a lesser degree, a little good will arising from its positioning/potential for growth and producing better returns.
Anything you can do to increase the cashflow of the business will increase its value. This primarily comes down to:
decreasing operating costs - this can be as simple as finding a cheaper snow removal or landscaping service; switching to low-flow plumbing fixtures to reduce water consumption; or more involved projects such as improving the air sealing and insulation of the building envelope to reduce heating costs or expanding the number of rentable units in the property.
luck{?} of location - if there becomes a better use for your property - say as the result of urban redevelopment - the "potential" of your business goes up. This is the part of value improvement over which you have he lease control ... though there are many investors who try to forecast areas of increased demand for property/land when they are looking to purchase.