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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
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- 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 help 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.
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- 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 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 property’s value, so having a strong knowledge of construction and project management is paramount to securing the largest piece of the capital stack.
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- Also, 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 and make the property more efficient, such as low-flow toilets, updated electrical outlets, and updated efficient faucets and showerheads.
Interior and Exterior project examples:
Interior
Before After
Exterior
Before After
By the Numbers
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- In our most recent property rehab, unit turnovers paid for themselves within 4-5 years with rent increases, all while increasing the property’s overall income. Cost-efficient construction helps drive 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 points further,
you can reach out to us at info@yankee-capital.com
OUR WEBINAR SERIES WILL CONTINUE!
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