Capitalizing Rehab Costs And Accessing Equity In Distressed Purchase
How do you folks pay for major repairs/rehabs if you buy multis below value and how do you access the embedded equity - ARV loan? Rehab and refi in a year (for seasoning)?
Am trying to do this on 3 fams, 6 fams, 15 fams, etc...b/c I found several distressed sale packages. Doesn't seem as easy as SF. Appraisers only care about income, and I can get tenants to pay 90% of FMR with a property in 60% condition.
So it doesn't pay to fix 'em and hold 'em? Do I need to resell to realize the embedded capital gain? And then I'm tagged as a dealer?
For this discussion skip units that are 4 or smaller. They are priced differently (or at least can be and are also financed differently).
If the income is the driver in value then you need to focus on establishing the new rent levels before you can claim there is any increase in value. Doing the repairs is nice but until the income rises the repairs have no value.
Others can comment here. An idea is to spend a little more time talking with appraisers as to how they establish rent levels and what they look for when the history says one thing and the new rents indicate another.
The nice thing about multi-unit properties is it is all about the income and much less about how someone feels because they can buy the place to live.
John
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