With prices of materials and labor at near record highs, is this a good time to remodel my units? What are the advantages of doing improvements now?
MAJOR REMODELING MAY FREE UP AN UNDER-RENTED UNIT
Check this out with your real estate attorney before you move forward, but one way in certain locations, to vacate a unit that is underperforming because of low rent may be to do a major remodel. This will involve at minimum remodeling a kitchen, a bath, or maybe even both making the unit temporarily uninhabitable. The costs for such repairs will amount to much more than any increased rent but it will give you a more desirable unit and a better income, thus increasing your GSI (gross scheduled income) which is your income after expenses and a figure that your building value will be based upon.
GET A BETTER DEAL
With prices up on materials, many people are electing not to move forward with big projects. This will mean that there is less demand for contractors and you may be able to obtain a better price than say, last year. If interest rates come down, as I personally think they will, you would be able to refinance and recoup some of your expenses. Additionally, you will be generating higher income, so your building will qualify more easily for the loan, maybe even a higher loan amount. At the end of the day, you will have created value by the improvements you have made to your asset.
GET GOOD ADVICE
Before moving forward, of course, you should check with your real estate attorney and your CPA. They can look at your entire situation and advise you as to whether this is the best time for such a move. It may be more productive to sell now and exchange into another class of property, such as a triple net or a Delaware statutory trust, in order to reduce management responsibilities.
What we at PRS PROPERTIES CAN DO. We can discuss with you the current rents in your area and supply you with comparable rental prices for similar properties. Before you hire a manager, make sure the compensation is fair to you! We can also look at your building for changes that might allow you to get a higher value in order to create value without huge expenses for your building. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.
We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, a moratorium, or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are in 1031 exchanges and need to identify a replacement property before their 45-day identification period runs out.
Should you decide to put your property on the market, we will put together an aggressive, targeted, and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.
Remember – KNOWLEDGE IS POWER!
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