3 unit apartment - Forced Appreciation questions

[Andrew Michaud]

I am looking into purchasing a 3 unit apartment. The apartment is split into two separate buildings. One building is a duplex and the other is a 1 bedroom house (very small). So from what I have read up on, appraisal value on 1-4 unit properties are based on comps in the area. This property will cash flow which is most important to me, but I am also looking further into other possibilities in the long term for this property! CAP rate is 13%, CoC Return is 80%.

What have you guys experienced with appreciation after rehabs on 1-4 unit multi family properties? This property needs a new roof, new windows, new vinyl siding (currently cedar shake siding). I am a building contractor and actually have 80% of materials to do all of this work already from previous jobs.

To put a new roof on the property it will typically cost $11,000 labor and materials. It will cost me 2 days of labor between me and my guys as I already have the material at no cost saved from other jobs in the past 2 years. How much room for appreciation would a new roof force onto this property? I feel I have a lot of room to totally rehab this property for very cheap and most of the cost will be labor paid to my crew but will it make a significant difference in forced value?

What differences in value have you guys noticed before and after a rehab on 1-4 unit multi family properties?

[Ryan Murdock]

@Andrew Michaud Your question on appreciation is so specific to your subject property that's it's impossible for anyone to give a solid answer. You really have to look at the comps for that property to see what the ARV will be. A new roof and improvements could gain you a 200+% return on that investment or the value could increase by only a fraction of the money you put into it.

We don't have the all the info but at a 13% CAP on what is already a low price property sinking $11K+ for a roof plus windows and siding will likely put you upside down on this thing as it will look nice from the street but doubtful rents can be increased to offset. I'm just speculating here and more info could change my opinion in a hurry.