Investor · Philadelphia, PA · Member since 2016 · 87 posts · 29 votes
I recently purchased a 6 unit property, and should have all the units leased up in the next couple of weeks. I purchased using a combination of my own cash and some hard money, and have put in around 80k worth of rehab costs.
I'm looking to refinance as soon as it's occupied, and use that to pay off my hard money lender and some credit card debt. Obviously I want the property to appraise for as much as possible because of this.
That being said initially I had planned to power wash and paint the exterior of the building, but some unexpected expenses came up, and it also filled with tenants faster than expected, so I the state of the exterior paint wasn't a deterrent to tenants. My question is, would painting the exterior be beneficial to the appraisal value? Is it worth it to the tune of 7k-10k in painting costs?
If you have no issues with renting the units, then painting the exterior can wait. But if you feel that by painting the exterior you can raise rents, then I would expend the capital for painting. We normally like to paint and power wash the exterior to give the tenants a feel that there is a new owner and we want to add value to them. Normally, our units are under rented and we just don't want to go in and raise rents, we want to offer a value add.
Although multifamily values are based on income, some appraisers do take into account the appearance, especially if there is some deferred maintenance.
@Dewain J. The exterior look of the building could add to the appraisal value, but most of the value in multi-family is based on the income generated. I think the appearance matters less than it would in a SFR property.
It is hard to answer because we can't see the property ourselves.Your current tenants probably care but needed housing too much so they moved in anyways.If you have to seriously ask if your place looks bad,it does and it needs painting.Yes,painting and landscaping can help with appraisals.
If you have no issues with renting the units, then painting the exterior can wait. But if you feel that by painting the exterior you can raise rents, then I would expend the capital for painting. We normally like to paint and power wash the exterior to give the tenants a feel that there is a new owner and we want to add value to them. Normally, our units are under rented and we just don't want to go in and raise rents, we want to offer a value add.
Although multifamily values are based on income, some appraisers do take into account the appearance, especially if there is some deferred maintenance.
I second dewain, it's brick, it absolutely does NOT need paint. It looks like it could use a good pressure washing, but that is easy and in the long run you are saving your self from having to repaint it again in years to come. Leave it. Not worth the cost at all.
As far I understood, a 6 unit property is not going to appraised via sales comps. It will be based on the cap rate locally wouldn't it?
So I'm not sure how they could ding you for painting unless there's an adjustment for condition and the paint is so bad it may affect condition.
I think you need a multi family investor to weigh in on those types of appraisals though. I only know residential. But, again, from everything I've read, the appraisals for commercial/Multi-family (over 4 units) is based on cap rate for the most part.
Thanks for the detailed responses. That was my gut feeling, but was making sure I wasn't just being cheap lol. Think I'll look into the pressure washing some and if that's reasonably priced leave it at that.