We're looking at purchasing our first multi-family, and want to stay under 5 units on this one just to get our feet wet in the arena before jumping into commercial lending. I've identified a potential property that is 2 brick ranches broken into 4 2bd/1br units. All 4 units have been rented out for 3+ years. Rents are $525, $550, $550, $600. Similar units in the area (of which there are only a handful of vacancies) are running $850/month. Asking price is $240K, and they're looking for a cash sale. We shouldn't have any issue getting a hard money loan with 20% down. My question is though, if I want to renovate in order to refinance (since simply increasing rent and decreasing expenses won't effect the value of the property) what is the best strategy? I really want to recoup my cash as quickly as possible but it would seem the only way to do that is substantial renovations inside. The outside if in pretty good shape. So my question is, do I:

A. Wait until the first unit is up for renewal (at least several months out) and raise the rent substantially (I'm thinking $750) hoping the tenant will not renew, then renovate, repeat again when the next lease is up, then refinance?

B. Offer to put 2  tenants up at a nearby hotel for a few weeks while doing a quick reno in their units and then refinance.

C. Something I haven't thought of...

Feedback and insight would be appreciated, thanks.

I would suggest option A, if you opt for option B I would only do 1 unit at a time. Also check the state laws in Washington we have to give a considerable amount of notice.

Anything 4 units or less is single family for all intents and purposes. Because of the comp based value approach used, the only way to get your money out is to buy at a discount and rehab to bring the value up to market. You have to get it cheap and empty to do it quickly. If you use a hard money lender, you don't have a lot of options as carrying costs will get you. If you can secure better financing and do it as the units turn, it works, just takes longer.

I think that option A sounds great. But why are the rents so low? Have you done a walk through?  I would suspect that this place needs a major overhaul not just a little work.  

If the renters have stayed its because for the price they are paying it is okay to except less than stellar accommodations. 

I would do a lot of looking into things.....it looks and sounds fishy to me. 

Good Luck!