Renovation Base Budget for Multifamilies

[Felix Torres]

Hello Everyone,

I have a few questions on renovations and long-term profitability.

Do you have a base line on what you should spend on renovations?

How do you develop your budget?

Do you under or over estimate your renovation budget? I like to over estimate.

Do you adjust your budget based on the size of the property or keep it the same? I ask because you can have 3 properties, the same size, but can be a single, duplex or triplex and all will require a different budget.

What strategies do you have when determining the profitability of a property for the long term.

[Greg Dickerson]

@Felix Torres there are no hard and fast rules as each property, market and conditions are different.

In general here is how I would answer:

1. No Baseline - you need to run the numbers and spend what is appropriate to make the units clean and safe first and foremost then whats the best return on investment for the asset, market and rents. 

2. I create a detailed line item budget while walking the property myself then get detailed written estimates before ordering the work.

3. I always add a little cushion and a contingency of 5% on larger projects.

4. Each property and unit could be very different. You will have some overlap and consistencies per unit but sounds like yours are all different.

5. You start with market rents in your area and work it backwards. Its rental income in operating expenses out. Keep it simple.