Syndicators-managing the rehab for value-add 60+ unit deals

[Chihiro Kurokawa]

Once you've closed a deal and it's time to start rehab, what exactly is your process? 

Are there lender requirements on when the rehab must be completed by? 

Does the property manager typically manage the contractor or does that fall on the syndicator? 

Do you renovate interiors as tenants leave or do you encourage vacancy by raising rents and getting the rehab done more quickly? 

Any other good-to-knows? 

Thank you!!!

[Jeff Greenberg]

Well as you know, it depends!  The main thing is, don't wait until you close to figure it out.  It is very difficult to answer this plain vanilla question.  The deals that we have done, the PM ran the show with us approving the budget and bids.  We had vacancies and we started there.  If I didn't have vacancies I would probably start raising rents to get some tenants to move. Don't do all at once and scare them all out. I do know someone that did that, and lost 100% of the tenants.  She rehabbed them all and filled it back up.  If you enjoy sleepless nights, that might be a way to go.

As far as lenders, that depends also.  On one deal I had a lender require it be done in 6 months.  Here is the fun part.  So the lender required about 60k of repairs to be done.  So they held back the 60k from the loan we were given.  Then we had to come up with 60k to do the repairs(we expected to be able to use the the loan proceeds), and then afterward, have to wait for them to release the funds.  Be prepared with extra money.