A multifamily investor outlines a strategy to test rent increases by renovating 10% of units first, targeting $150 more per unit. If it works, you can sell at a higher price or refinance and keep the property for cash flow. The key: positive cash flow on day one, fixed-rate debt, and realistic 3-4% annual expense growth.
We'll see how far we can push the rents, and we should get maybe $150 more, let's say, on those units. That's called proof of concept. Now you've proven that you can renovate some units and push the rents up. That's a story. Now you can do that on the whole project. So now if we could sell it, actually, at that point, you could do 10% of the units, do proof of concept. We could actually sell it for a lot more than we bought it for. Or the If the rates are cooperative, maybe we'll refinance and renovate it and just use the rest of the project and hold it for cash flow. So we're going to have 2 roads to go. And that's what I mean by a story. Yeah. So every deal, it cash flows on day 1 as is. That's really important with fixed rate debt, not floating debt, and expense growth of maybe 3%, 4%. Like you have to really say expenses are going to go up and you have to be really diligent on the way you're underwriting it. And then there has to be a story around that.
