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Updated about 5 years ago on . Most recent reply

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AJ Smith
  • Rental Property Investor
  • Bettendorf, IA
75
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153
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Picking Renovations to Increase Cashflow

AJ Smith
  • Rental Property Investor
  • Bettendorf, IA
Posted

What renovations are your best bet for raising your property to market rate rents?

I had an "Aha!" Moment while analyzing Minneapolis multifamilies with below market rents today: "the right renovations will pay for themselves."

That is to say, the right renovations will increase your monthly cash flow to the point where the cost of the renovation is outweighed by the increased rent it brings in.

This realization was like a light bulb going off in my head. It's made my deal analysis goals a bit clearer in terms of how I can make more deals viable through the right renovations, and its made things like the 203k loan and the Homestyle Loan make much more sense from a numbers standpoint. 

However I'm still unclear on what "the right renovations" generally are, and how to determine this based on individual properties. I assume it's by looking at what is outdated and needing to be replaced, but I wanted to throw the thought out there to see what you all think.

All this to ask: how do you all figure what renovations will best raise your property's units to market rate rents? 

Thanks all for viewing, and I look forward to your responses.

Most Popular Reply

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Tim Swierczek
  • Lender
  • Saint Paul, MN
1,629
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1,537
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Tim Swierczek
  • Lender
  • Saint Paul, MN
Replied

@AJ Smith "the right renovations" will vary based on the property location and the type of property, and somewhat the size of the property.  For example, we purchase in an area where bedroom size is not extremely important, neither is the curb appeal, but we find that our tenants demand on-site laundry, they like having a dishwasher, and they appreciate central AC.  They also pay extra to some extent for updated units, stand up showers are ok for them.  These would not all be true in other areas. Garages don't matter much to most of or tenants but, not having garage parking will limit us with some renters.

In suburban areas, they may want a big garage, they may not accept small bedrooms, they may not care as much about updated as our tenants.  I'd look for the typical renter in an area and figure out what they want and use that as your guide.

  • Tim Swierczek
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The Tim Swierczek Team - Primis Mortgage

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