BRRR with Multifamily?

[Samuel Coicou]

I think I've only seen the BRRRR method explain in conjunction with SFHs. Does that mean multifamily homes don't increase in value after rehab, in comparison to SFHs? Does that mean the only way to do it is to find multifamily properties undervalued that does need any work?

[Account Closed]

In multifamily a very similar value add strategies are used. Multifamily properties are valuated based on the income that the property generates. If your renovations allow for higher rents (or possibly allow for sources of ancillary income), then the value of the property will increase proportionally. The neat part is that the value of the property will increase AND the cash flow will increase at the same time. That said, this works both ways. If you take over a multifamily property and somehow lower the Net Operating Income then you will destroy value and cash flow. 

As you begin digging into the commercial side of real asset investing, you will find that this method of valuation allows for more flexibility on the business strategy. I personally think it is pretty cool. Happy to help with any questions you may have. 

- JA