Will plumbing and electric rewiring increase value
We recently purchased a 6 unit building and are in the process of rehabbing it. Because it’s a very old building (more than 100 years), turned out there is more work needed than our initial scope. Most notably, it looks like we will need to re-do all the plumbing to replace into pvc pipes, and also converting the gas heat into electric so we can separately meter the electricity and also replacing and modernizing up from knob and tube wiring. We’ve heard that these improvements will increase the appraised value. Can someone confirm this? What is the best way to convince the appraisers? Does showing separate sub metering for electric and water help? Thanks in advance!
Most Popular Reply
Those improvements will help, but not because of any change in appraisal. A six unit building is classified as commercial (anything greater than four) which will have its value based on NOI and Cap Rate not appraisal.
Sub metering will transfer utility cost to tenants thereby lowering your operating cost. In a longer term look, the facility upgrades will also lower your operating costs as you should have less repair costs.
So in the first year after your improvement changes you should see a higher NOI which will result in an increased property value.