From the course: Introduction to Commercial Real Estate Analysis

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Multifamily case study B

Multifamily case study B

From the course: Introduction to Commercial Real Estate Analysis

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Multifamily case study B

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- [Instructor] Okay, so in the last lecture, we had this low renovation early on and then a higher exit renovation, right? And then we saw that the returns weren't very appealing at all in this scenario because we can't achieve the rents, the market rents that we want, right? So what if we flip this around and achieve higher rents, right? So let's do $200,000 early, let's do $25,000 later, and then now let's say because they look so much better, we can get even slightly above market rents, and, you know, let's say that now, because we do the renovations, it takes, no, actually, no. It's pretty stabilized. We're just going to start moving the rents up on the tenants here. So with the, you know, higher market rent here and, due to the initial higher renovation, if we're able to be confident about these market rates, our returns are going to be much more attractive now, you know, because it makes a huge difference over the course of 15 years if you're able to charge closer to market…

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