Property Appraisal & Renovation

3 Replies

I recently purchased a 14 unit multifamily property and in the process of doing a major renovation. I fear that I may be "over renovating", but the rents we are getting still make sense to keep the project going. Thus far, 2 units are completed and 5 others in progress. I was wondering if anyone has experience with obtaining a professional property appraisal during a renovation to see if the after repair value per unit is what you anticipate it to be and then using the appraisal value (in this case on the first 2 units) to steer the level of renovation on the subsequent units. My concern is that the property value by NOI may be different than using a sales comparable method. I do not want to end up locking up my money in the property. I plan to do a cash out refinance at the end of the renovation.

Because this is a commercial property it is not valued using comparable sales like a 1-4 unit would be so its value is determined by the income it can produce.

@Tzvi Nussbaum As @Aaron K. noted, a commercial property is valued based on the income produced. So if you have the stats (aka underwriting) confirming that the additional renovations will translate into additional rent, then it is worth continuing with the rehabs. 


Thank you Aaron and Alina. So if I plan to do a cash out refi, how long would I typically need to wait before a lender will loan on the property. Would I need to show P&L for at least a year? 3 years? I hope to get institutional financing from Fannie or Freddie.