These insights are specifically tailored to help save time, effort, money, and increase net operating income when purchasing multi-residential properties.
- Condition of Building
Take special consideration of items such as the age of the boiler, roof, windows, plumbing, wiring, previous renovations, and exterior cladding. If these items have not been recently updated you could be leaving yourself exposed to capital expenses ranging to thousands of dollars in value. Moreover, a lack of consideration of these critical factors will throw the valuation of any building entirely off.
- The Meaning behind Profit and Loss (P&L) Numbers
The numbers provided in a P&L are routinely interpreted differently by each owner and buyer. At The Doyle Team, we compile comprehensive P&L packages valuing properties the way we know lenders will evaluate the building. This clarity makes financing much more achievable. When formulating a P&L report: include 5% for property management fees, 3 percent for residential bad debt and 5 percent for commercial bad debt and vacancy of the gross rent. Be sure to account for an expenditure of $750/unit for repairs and maintenance. Be vigilant, as many owners leave these expenses out of the P&L report to make the building appear more attractive at the onset.
- The Numbers Expanded Part One:
First-time buyers should study a property’s facts and figures closely. In select cases, utilities such as water, hydro, and gas are rounded favorably by owners to represent their property as having a higher NOI (Net Operating Income). Before beginning the acquisition process, it would be wise to gain basic literacy in typical utility usage across various building types and unit counts. Being thorough from the beginning of the purchase process can save time, money, surprises, and headache.
- The Numbers Expanded Part Two:
If the numbers are correct for utilities, but they are on the high side, be vigilant of ways to increase the NOI of the property by lowering the cost of utilities. Strategies for achieving lowered utility costs are as follows: installing water efficient taps, shower heads, toilets, updating the boiler system, and installing efficient light bulbs or LED lights.
- Property Management & Building Supers
Depending on the unit count of your newly-purchased property, it may be financially advantageous to eliminate the Site Superintendent and employ a property management company. In our experience, your building will run smoother and incur fewer problems under the care of an effective and established property management company. This will have the added benefit of removing direct contact between Landlord and tenant.