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Key Takeaways from our Webinar: The Importance of Construction in Multifamily Investing

June 26, 2020 – Business

multifamily investments
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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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