Value-add Improvement IRR Expectations in SFR / BTR?

[Brett Jurgens]

I'm trying to get a better understanding of the unlevered IRR hurdles SFR / BTR investors have for value-add improvements.

By "value-add improvements" I’m referring to upgrades made to a property that increase rent or purchase value, often including kitchen remodels, bathroom updates, solar and other energy efficiency improvements, fresh paint, a new garage door, finishing a basement, adding a deck, and updating flooring, to name a few.

I’ve been hearing a lot of different reactions to this question the last few months. It seems like 20% is a pretty good average. The upgrades that HAVE to be made for rentability vs. those that will hopefully increase rental income can definitely influence the response.

What are people's expectations?

How much IRR do you expect certain improvements to generate?