All Forum Posts by: Annie Chien

This is a challenging one because it isn't like you are getting more rent once these renovations are done and depending on what you are doing, you would then have tenants that are fine with the way things are but start doing wear and tear.

Here is how I would prioritize the work:

1. Health and safety

2. What does your insurance require? At some point they are going to do an inspection. This will need to be addressed ASAP.

3. Preventative maintenance (things like gutters or removing/trimming trees).

4. Then as units become vacant, then do other renovations.

Hi Rick - I love this approach and way of thinking. Prioritize and tier our the project by phases. I would probably choose to do the electrical plumbing first. This is very helpful. Thank you!

Of course! The challenge with systems is that you don't get a premium in rents just because the plumbing is new. Tenants are expecting working plumbing and electrical. I'm not saying to cut corners, just prioritize based on the list and go from there.

You are right Rick. I just came back from the city hall today. The rent increase that can be passed comparing to the capital expenditures is capped. Now I'm really thinking to prioritize in phases so that we could gradually pass on the CapExp phase by phase. It just requires more paper work with the city.

1 Vote

Quote from @Jonathan Greene:

Quote from @Annie Chien:

@Nicholas L.

So purchase is around $1.2m with renovation budgeting around 200-300k, ARV is right around $1.4m with some recent sale records for market comps. This property is close to jobs, shopping malls, hospital and other living infrastructure. And we have done a whole house renovation to the stud a few years back. I was heavily involved in the renovation and am relatively familiar with the construction side.

Our plan is to hold this property for long term and then wait for a couple of years to add more to the portfolio.

We live in a pretty expensive area. The multifamily housing market has been trending down about 10-15% since its peak in 2022. I am well aware that there are better deals around the country. I just feel more comfortable to start manage nearby homes to get comfortable before we can venture to out of town places.

Maybe this way of thinking is not even the best approach to start out the investing. I am really appreciating that folks like you are sharing their experiences and train of thoughts, which helps me tremendously to better position ourselves at this market.

None of us need to look at more of this other than $1.2m purchase price and 300k renovation with an ARV lower than price + cost, with no experience (other than your own reno which is good) and no real idea what you are doing. Why in the world would you commit (and risk) this much on your first one?

Again, the purchase price plus reno is less than the ARV so how does that work for a refi and what are the worst-case and best-case scenario on rent roll?

You are right, the current ARV is probably right around the total of purchase and reno, which does not justify for a flip in this market, assuming there's no potential unforeseeable costs, which left no cushion. We are looking for cashflows and long term holding with projected appreciation. So this plan might not cover the risk scenario if we were to liquidate in a timeframe shorter than what we've planned for. But refi could very likely justify. I have managed just one rental of SFH for 6-7 years in the past. But that renter was very easy going and the rental laws were less strict back then than now.

Out of many we have seen, I like the neighborhood of this specific one better comparing to the rest. It feels much more decent and way better maintained on the street. And the surrounding neighborhood we are aiming at for this specific listing did not have anything popping out for the past 2 years. But it does require more TLC work comparing to the others we've seen.

Anyhow, I really appreciate all the opinions and advice everyone has given here for some directions. I've got a much better idea now.

Thank you all!

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@Nicholas L.

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Quote from @Jonathan Greene:

Normally when someone makes their first post and says they found a deal, it's not a deal. I can tell you that no matter the price, this is not a deal for you if you have never owned or upgraded a home or multifamily before.

If you have full occupancy and "the windows, roof, electricals, plumbing systems, and gas lines all need major upgrade to bring the property up to date" that means you have bargain rent and enormous capital expenditures. If you don't have a unit open to cycle each tenant through while you renovate them, you don't have an option because things will keep breaking when occupied and you will be getting less and less rent and no profit for years.

You are right Jonathan, we just started out and like you said technically it should probably not be called a "deal" to the standard of a wholesale investor.

We are just putting our first step forward. So any advice would be extremely precious for us to leverage some past lessons and experiences from the veteran investors here to reduce our risks of investing.

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Quote from @Rick Albert:

Here is how I would prioritize the work:

1. Health and safety

2. What does your insurance require? At some point they are going to do an inspection. This will need to be addressed ASAP.

3. Preventative maintenance (things like gutters or removing/trimming trees).

4. Then as units become vacant, then do other renovations.

Hi Rick - I love this approach and way of thinking. Prioritize and tier our the project by phases. I would probably choose to do the electrical plumbing first. This is very helpful. Thank you!

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Quote from @Alecia Loveless:

@Annie Chien I’d recommend starting with a property that doesn’t need major upgrades. It’s a big issue trying to upgrade units with tenants in place especially if they have pets that will be disturbed or have an increased opportunity to escape while contractors are going in and out of the units.

I just installed gas heating systems in 2 buildings and we’ve probably had to go into each unit 25 times during the course of the install and the inspections that followed. (Gas company, insurance company, building inspector).

And 25 times was just one renovation. Now multiply it times the 6 or so upgrades you’re talking about. It’s also not as cost effective to just upgrade one unit when it’s vacant because then you lose economies of scale and in the instance of materials things may not be available over an extended period of time and you may end up with mismatched windows or something.

Normally we only try to go in units 2X per year unless there is a maintenance issue.

Hi Alecia, thanks for the practical tips. You are right, there's a balance of economies of scales vs. efficiencies over coordination with tenants of each unit. Like what Rick recommended, it is probably a good idea to prioritize the capital expenditures and time it out through the coming years.

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Quote from @Nicholas L.:

@Annie Chien

not enough info.

are you asking how to make the improvements while it's fully occupied? or which improvements to make? do you want to live in it, or just own it?

and finally, and most importantly, how do you know it's a "deal"? maybe the owner wants full retail price even though it needs all these repairs... and thus isn't a deal. is it on the MLS? if so... probably not a deal.

Hi Nicholas, thanks for the response. I am asking how to do the major upgrades while the units are fully occupied. The more imminent needs are the electrical, plumbing, roof and upgrade to double pane windows, most of which will be pretty dusty if there are humans living in the space. However, I am worried about the outdated electrical and water systems for safety concerns.

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Hi all,

I have encountered a deal of a fourplex, with full occupancy. It is in a nice neighborhood. However, the property has been having delayed capital upgrade or proper maintenance for a long time. The windows, roof, electricals, plumbing systems, and gas lines all need major upgrade to bring the property up to date.

If all of the units are currently occupied, what would be your best revitalization strategy to bring the building up to its proper condition?

Thank you!

Annie

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All Forum Posts by: Annie Chien

Annie Chien has started 1 posts and replied 8 times.

Post: What would be the best revitalization strategy for a Fourplex

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Post: What would be the best revitalization strategy for a Fourplex

Post: What would be the best revitalization strategy for a Fourplex

Post: What would be the best revitalization strategy for a Fourplex

Post: What would be the best revitalization strategy for a Fourplex

Post: What would be the best revitalization strategy for a Fourplex

Post: What would be the best revitalization strategy for a Fourplex