To paint or not to paint?

[Dewain J.]

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? 

[Gino Barbaro]

@Dewain J.

Hi Dewain

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.

Sounds like you've got a great deal

Good Luck

Gino