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.
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.