Estimating Value-Add Rehab on Multifamily Properties

Multifamily real estate investing is an excellent form of investing outside of the single family space and a great way for you as a real estate investor to build wealth and generate monthly cash-flow. A multifamily property is defined as any property with five or more units such as an apartment building. A great way to increase your potential cash-flow on a multifamily property is to complete value-add rehab. As with a single-family rehab project it is essential to correctly estimate your rehab budget to avoid costly expenses that will eat away at your overall cash-flow. In this post, we will explore steps you can take to correctly estimate your value-add rehab on your multifamily property and increase your monthly cash-flow and return on investment.

1) Have an appraisal and inspection done

One of the first things you can do to estimate the amount of value-add rehab on the property is to have an appraisal and inspection done. An appraisal and inspection will give you a good sense of what the property is currently worth and the amount of rehab needed to bring the value of the property to where you would want it to be. Having a good understanding of the properties current value will help you determine any potential gains made from adding rehab. It will also give you a good idea of the shape that property is in and an overall scope of how much work will be needed.

2) Find sales comparisons for the area

Have your realtor pull sales comparisons for similar multifamily properties in your area to determine what those properties are selling for in your market. Sales comparisons will give you an idea of what you can expect the after-repair-value of your property to be once the rehab is completed and can also help you formulate your budget. Knowing the market is critical for estimating current and future value of your multifamily property and getting the most out of your investment.

3) Plan your budget

When you begin to plan your budget, you will need to formulate what type of materials you want to put into your property. Do you want to put stainless steel appliances in every unit or would you rather put in standard appliances? Determine what you’re comfortable with spending based off the numbers from the appraisal, inspection, and sales comparisons and create your budget with that information. It is wise to plan for any unexpected problems such as bad wiring or faulty pipes that will need to be repaired when calculating your budget to avoid large costs.

These three steps can help you to correctly estimate the value-add needed on your multifamily property and help you pursue a successful investment. Having a sound budget and good understanding of the market goes a long way in determining the potential value of a multifamily property and your return on investment.

The Lima One Capital multifamily program offers investors the exciting opportunity to purchase or refinance multifamily properties with 5+ units that are either stabilized or in need of value-add rehab. To learn more about the multifamily program click here and get started today!

Lima One Capital, LLC. NMLS ID # 1324403, 201 E. McBee Ave. Suite 300. Greenville, SC 29601. Lima One Capital, LLC is not currently licensed in AK, ID, ME, MT, ND, NV, SD, UT or VT. Lima One Capital, LLC is licensed or exempt from licensing in all other states. Minnesota: This is not an offer to enter into an agreement. Any such offer may only be made in accordance with the requirements of Minn. Stat. §47.206(3). Lima One Capital, LLC is licensed in Arizona as a Mortgage Broker (License No. MB-0936439) and Mortgage Banker (License No. 949706). Lima One Capital, LLC is licensed as a California Finance Lender under Department of Business Oversight (License No. 60DBO-45834). Lima One Capital, LLC is licensed in Florida as a Mortgage Lender (License No. MLD1555) and Mortgage Servicer (License No. MLD1662). Lima One Capital, LLC is licensed in Oregon as a Mortgage Lender (License No. ML-5397). Annual percentage rate may be increased after fixed-rate period expires. Loans are subject to additional underwriting criteria.