All Forum Posts by: Brian Green

@Jeffrey Wannberg and @Joshua Tobin

Yes, to this point I believe our renovations have been far more substantial than standard "value add" which may explain the cost of rehab difference. In many circumstances we were replacing roofs, hvac systems(or adding a/c), granite or quartz counters, etc. I guess the key is the entry point on the buy versus the spread to the ARV. It seems like we are buying properties in far more distress and moving them further up the spectrum into high end for their markets.

If we didn't do stone counters, stainless appliances, a/c, roofs, etc. are numbers would be much closer to $10k. I guess that's the distinction but the renovation schedule we are putting in is designed to not have to touch these buildings with CapX for 10+ years thereafter. Less mgmt and all cash flow. 

Oh, and we don't do any of the work ourselves anymore. There's no way we'd be able to get to the scale we want doing that so it's all contracted out. 

@Henry R. I wouldn't be scared off by the flat roof but I would assume the cost of replacing it in your acquisition costs. Or if for example you were going to offer $300k, I would get estimates on installing a new roof and then subtract that off your offer. The two buildings we own in Mechanicville both have flat roofs and we replaced them both immediately after acquisition so no worries for 20+yrs. But we figured those costs into our renovation expense. Hope that helps. 

Oh - the 7k sq ft 6 unit - roof cost was $15k I think and the other building is 3500 sq ft and the roof was about 11k if I remember correctly. Layout will matter but I checked out the property on Google Earth and It has a lot of square footage so I'd estimate $25-$30k.  We used an EPO(i think that's right) rubber roof which is supposed to the best available. There white so when you analyze props on Google Earth, normally if the roof is white its fairly new. Just a tip. 

Good luck. 

@Henry R. 

Couple things that stand out to me. Renovation estimate seems light; $3k to update several apartments and repoint parts of the exterior brick work? I'd budget much more; even if you are doing the bare min to the interiors of those empty units(paint&some flooring maybe) along with the brick work = $10k+. 

R&M as well as trash seem light as well.  25+ bedrooms in the building you'll need a dumpster - in the Albany mkt that's at least $250/mo. 

CapEx budget moving forward I'd also increase for a 100yr old building. If that roof needs replacing you're looking at $20-$25k easy. Budgeting for $4k annually isn't going to get you there.

It's largely irrelevant but that building probably wouldn't sell at a 7cap given its age/condition/location. I just recently refinanced a 6 unit in Mechanicville NY after renovating everything and the appraiser used an 8 cap.  Its probably more like a 9 or 10 realistically. 

On the banking assumptions - I'm curious where your getting 30yr amort on a commercial building under $1million(not agency eligible).  All the local banks in the area that I've seen will only provide 25yrs.  If you know of a bank with 30yr please let me know! 

@Edward Liu Thank you Ed. As I review some of those labor costs they seem really low. I'm hiring all outside contractors and ensuring they are legit(insurance/contracts/etc.). Are your property managers hiring to the same standards? 

I appreciate the pricing example so my team can go back and start re-evaluating our cost breakdowns. Great example. Thank you. 

@Serge S. Great feedback. More specific to the flooring. Is there a reasonably priced product you are currently using or have had success with? You mentioned you don't care for the laminate plank either so are you using LTV, real wood, other?

I'll have to shop a bit more seriously for cabinets, counters, and appliances. Seems like we're over paying with our current product type/vendors. 

Great help and perspective, thank you! 

Why do our renovation expenses seem to be so much more expensive than investors I hear on BP podcasts or at conferences, etc.?  I hear investors repeatedly quoting renovation expenses of value-add apartment renovations between $3500-$7500/unit. I have no idea how they are doing this given the fixed expenses associated with construction and materials.  Routinely investors on these platforms list  appliances, counters, flooring, and updated cabinetry(facing/painting/hardware/etc.), among other things as part of their value-add renovations. 

I began investing in small multi-family properties in need of significant renovations about 4yrs ago.  The properties are value-add investments with complete renovations to the buildings both inside and out.  My experience has been that with these properties our renovation expense has typically been $20-$25k+ per unit.  This covers stainless appliances, counters(stone or laminate pending location), refinishing hardwoods or installing new laminate floorings, paint, cabinets, light fixtures, complete bath renovations, etc. So pretty much everything is new when we are finished. 

Is this just a case of blurred definitions for value-add? Maybe our company is going way to far with renovations that aren't necessary to re-position the properties? 

Some common renovation expenses:

Entry level stainless appliances are $1600 - $2000

To repaint all surfaces of a 800 sq ft apartment is going to cost at least $1500; probably more. 

New flooring is at least $2/sq ft for product and another $3 sq ft to remove the old flooring and install. That's another $4000 per unit. (I hear numbers like $1200 for flooring thrown around by investors - what flooring is this and who is installing it for so little?)

Counters are $600-$800 for laminate or $1500 - $2500 for stone. 

This doesn't count lighting fixtures, bathrooms fixtures, window treatments, etc. And the total is already at a minimum $7000 - $7500. If the bathroom needs to be redone or kitchen cabinets need updating/replacing/etc. the cost increases exponentially. 

So my question is this. What renovations can be done within the $3500 - $7500 price points I always see quoted? Maybe our company is just buying properties in need of more renovation per unit than most investors will tackle? Someone please educate me on how on what we may be doing wrong.  Or are they just buying properties in need of much lighter renovations?  Send me your thoughts so we can improve our process and reduce our renovation expenses! 

Thank you.  

Michael, I agree with Brian V that searching just outside of Saratoga Springs is where you'll find opportunity. My company invest in Saratoga,Warren, and Washington counties and have had success in secondary towns as well as downtown. 

Dan Jordan, I'm interested in the Queensbury meet up you mentioned in March. Is that a BP Meetup? Is it monthly? Whose the organizer? Let me know, I'd like to attend. 

@Michael LaRocca The amount of cash you have on hand for down payment and repairs will dictate the neighborhood you can invest in to start. Do some reverse math and come up with a price point that works for you and then review the best neighbors that you can conservatively afford. Be certain to over estimate any repairs you and your partner will need to make and my preference would be to avoid duplexes and focus on 4 unit properties(maybe 3). In general you that size will have more forgiving vacancy risk and generate higher cash flow because of the higher number of units. 

Also - if you can avoid it I agree with Vitaliy Volpov on his point of avoiding FHA if you can. Not only will you be paying PMI at a slightly higher rate but they are more restrictive on the condition of what you can buy. Fixer Uppers that need a great deal of work may not qualify. Take action and be conservative with assumptions. If you buy it right and add value the market risks should be manageable.

@Scott Hollister Yes my brother and I are multifamily investors in the Saratoga Springs NY area. To this point we have done mostly small multifamily deals 3-6 units each in our home area but now are looking larger at 10-25+ unit properties.  I received your message and will try and give a call tomorrow to connect. Thank you. 

Just searched the Middle Market Forum as my partner and I area considering attending next month. Any feedback from last year's conference you can provide? Was it worth the investment and time? Appreciate your feedback.