All Forum Posts by: Jordan Santiago

@Jordan Santiago HML for a rental is probably not a good idea. They charge 10% or more in interest, and are usually short term loans 3 years or less. The interest will eat up all your cash flow, even if you are doing interest only with a balloon payment.

HML get their money back the same way as a bank, through interest payments. I've never heard of HML doing balloon only loans where you repay principal and interest entirely at the end of the term.

It depends on whether the tenants are at market rent or not. If they are at full market, which is unlikely, you pick the one that is lowest and give notice they will be going to full market. If they leave you reno that unit get it rented then move on to the next tenant.  If a tenant is willing to pay full rent, equilivant to a fully renovated unit, you leave it until they move out on their own. Your goal is to make rent high enough that it is not rational for them to pay and stay.

With this method a 4 unit should be at full market rents within 6-8 months. All units may not be fully renovated. 

@Jordan Santiago, if the rental is a multi-family with any utilities paid by the landlord that would also be an area to evaluate for value-add. Especially if the property is 5+ units (commercial). In a 5+ unit property the value is based more on its net income rather than comparable sales. So, doing value-adds that maximize the net income make the property worth more and by measurable amounts. It's called "forced appreciation".

So, if for example if heat is paid by the landlord and the building has an old oil fired boiler and you swap that out for a new high efficiency gas boiler you not only save yourself money month to month in operating costs, but you have increased the value of the property by a predictable amount.

We have done renovations like this on multi-family properties that were tenant occupied...mostly all month to month.  A lot of them were good long term tenants.  We decided to do it in phases and that of course the units needed to be empty..so..the owner had a notice sent to the tenants that we would be renovating the complex and that if the tenants were willing to move out they would receive a monetary amount to do that.  (they were given a 60 day notice).  Or...they could move them to a newly renovated unit with the increase appropriate increase in rent.  

1/3 moved out, which gave us the opportunity to rehab 1/3 of the units...then we had 1/3 of the existing tenants move into newly renovated units with the increased price, rinse, repeat.

Otherwise, if you have to renovate a unit when someone lives there, it is much more difficult.  We have moved people out to a hotel for a couple of weeks if needed.  

Hey Jordan,

That has been our basic strategy so far, and we don't renovate occupied apartments.  We wait until they want to move out (assuming rent is reasonable and they are good tenants), then fix up one unit at a time.

Sometimes you may have to do a little work while the unit is occupied, it is a pain for all involved.  We've done lost of work on building exteriors (roofing, paint, etc) and otherwise general upkeep.