Updating multifamily buildings

[Matthew Wright]

I understand that value is driven by income when dealing with multifamily (5 units plus), but at what point do upgrades/renovations increase value? For instance if I have an 8unit that has old painted cedar shakes and original 60s windows. How can I calculate my return for that improvement, if I replace siding with vinyl siding and put in new windows.... assuming this improvement won’t increase my rents.

[Scott Mac]

Hi Matthew,

My thoughts on this are:

How is the property performing financial right now vs. how will it perform financially after the expenditures.

Think about what you need to do to be competitive with your close in competitors as far as rent amounts and vacancy rates go.

Also look at if something will lower your expenses, and what impact that might have on your NOI.

What is your Pride of Ownership factor, if that's important to you. Some people just want everything very nice despite it's impact on revenues.

Good Luck!