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In our latest Webinar, we shared insights on how construction is a critical part of delivering great returns for investors. Below are some of the key points covered:
- Construction is a key element to a “value add” strategy
- Preliminary planning for improvements and a construction budget should be included from the very beginning of the underwriting process
- Effective planning and execution of construction helps increase returns in three ways:
- Increasing operating income through elevated rents
- Lowering maintenance and operating costs
- Increasing overall appreciation of the property
- It is key to invest with partners who have extensive construction experience
- Having relationships with contractors and suppliers is important in getting consistent, well priced and quality work, and building a partnership for future business
- Construction project management is essential in sticking to schedules and budgets, because if things are not going as planned, it can adversely affect your returns
- By maintaining construction relationships, you can get favorable pricing which allows you the ability to acquire deals that others see as not workable
- Lenders will require certain improvements as part of the financing of a deal. They will want to see a broken-out budget of renovation projects to increase the value of the property, so having a strong knowledge of construction and project management is paramount to securing the largest piece of the capital stack.
- In addition, certain projects may qualify you for a “Green” loan, which can come with a lower interest rate. These projects often include measures to help the environment as well as to make the property more efficient, such as low-flow toilets, updated electrical outlets, and updated efficient faucets and shower heads.
- Interior and Exterior project examples:
Interior
Before After
Exterior
Before After
- By the Numbers
- In our most recent property rehab, unit turnovers paid for themselves within 4-5 years with rent increases, all while increasing the overall income of the property. Cost efficient construction helps in driving the Net Operating Income (NOI) of a property higher, which augments the overall valuation.
As always, if you’d like to discuss any of these point further,
you can reach out to us at info@yankee-capital.com
OUR WEBINAR SERIES WILL CONTINUE!
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