The Capital Stack
Our Favorite Before & After’s
Ferndale 28
- Old Rent $700
- New Rent $1,250
- Cost to get there $14,000 per unit
- We ended up renovating 10 of the 28 units. Our all-in cost was $2.4 million we sold it for $3.7 million and did a 1031 exchange into 52 units in a better location.
Hollyvillage
- Old rent $675
- New Rent $950
- Cost to get there $6,000 per unit
- Seller had 112 applications for his most recent vacancy prior to us purchasing but didn’t raise rates to meet the market demand. We paid ~$61k per unit in November of 2021. Roughly half of the units had already been renovated to some level when we purchased it.
Creekside at Fenton Heights
- Old rent $850
- New rent $1,250
- Cost to get there $8,500 per unit
- Creekside is one of our best renting properties with very little vacancy. All the units are now renovated, and the property is on “auto pilot”.
Royal Oakland
- Old Rent $900
- New Rent $1,800
- Cost to get there $25,000
- One of the more high-end renovations we have completed which allowed us to double the rent in a Class A market. We were all in for ~$1.8m on this property and completed a refinance that valued the property at $4,150,000.
Major Market News
Starwood Capital Before and After
Starwood Capital is a large institutional real estate company who owns the 1 Hotel brand. Recently in 2018 they purchased the St Regis Princeville in Hawaii and rebranded to 1 Hotel Hanalei Bay with a $100m renovation. Across the 251 rooms this puts it at a ~$400k/room renovation for the hotel. What’s also interesting is the company operating it as a St Regis had previously bought it when it was a Sheraton and then completed a $60m renovation to rebrand as St Regis.
Before: https://www.kauaitravelblog.com/the-st-regis-princeville-resort/
After: https://www.1hotels.com/hanalei-bay/gallery
Source: https://www.bizjournals.com/pacific/news/2018/11/16/starwood-capital-to-invest-100-million-to-rebrand.html
Tips and Tricks
Tips
Knowing when to renovate a unit and the type of renovation to complete is crucial for the success of a property. Under renovating can “leave meat on the bone” but over renovating can hurt the properties cash flow. Often investors will put it more expensive finishes than the potential tenant cares for and it will still rent well and hit the numbers but could be done for slightly less money. Slightly less meaning $2000+ and doing that per unit across a sizeable property adds up very quickly.
