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The Pros and Cons of Rehabbing a Multi-Family Home

The pros and cons of rehabbing a multi-family home can often come down to your specific situation, and we’re here to help. 

If you’re looking for more income, rehabbing may be the right way to go; if not, it’s best to invest in something else. 

The Pros of Rehabbing a Multi-Family Home The Cons of Rehabbing a Multi-Family Home
Your business can use the rehabbed property as passive income or sell it for a profit. Buying multi-family homes in popular areas can stunt the resale timeline, costing your business money. 
Rehabs normally have lower interest rates than new builds, which will save your business money.  The rehab process can be very time-consuming.
Rehabs are more appealing to buyers. Rehabs may need further renovations down the line. 
Rehabs provide the flexibility to add amenities to the property. Rehabs can hide some very serious problems like mold or structural damage.

Read on to discover the pros and cons of rehabbing a multi-family home for your business. Additionally, we’ll discuss the process of rehabbing and the cost and estimated timeline you can expect for the project. We’ll also take a look at what services your business may need to take advantage of to complete a rehab project and how to choose what businesses to work with.

The Pros and Cons of Rehabbing a Multi-Family Home

There are many benefits of rehabbing a multi-family home that are worth considering. Rehabs can be an excellent investment for your business if you have the capital to invest. If not, there are many financing options available to help make rehabilitating your home easy and affordable.

Rehabs also add value to homes, resulting in future gains when selling happens further down the line. On top of these benefits, commercial rehabbers often find themselves with quicker sales than homeowners when it comes time to sell their properties, as well as more favorable interest rates from banks or financial institutions looking for investments. 

This is because rehabbing has become so popular over recent years due to higher demand and a lower supply of rehabbed houses on the market. Therefore, if you’re considering investing in a rehab project, be sure to consider these pros and cons before jumping in.

The Pros of Rehabbing a Multi-Family Home

When taking on commercial rehabbing projects, you and your business can expect various advantages from traditional homeowners. The pros of rehabbing a multi-family home include:

  • Businesses can use the rehabbed property for additional income by renting them out. Renting multi-family homes will help cover all costs associated with renovating their property. In some cases, they could break even after only one year! 
  • Rehabs typically have lower interest rates than new builds or buying an existing resale home. Lenders know that there’s less risk involved since you’re building from scratch instead of purchasing something already built.
  • Rehabs often attract a wider buyer audience because they offer something new, and trendy compared to an existing home that may have been around for decades or centuries.  
  • Rehabbing offers more flexibility than buying an existing resale property, especially if you’re doing any type of green remodeling. It’s easier to add solar panels or other types of environmentally-friendly, high-interest amenities to your rehab project, rather than trying to incorporate them into an older building. Older buildings with limited space and outdated architecture would make it difficult (or impossible) to do so.

The advantages of rehabbing a multi-family home are particularly relevant for businesses. Rehabs can accelerate the selling process as they are more appealing to buyers. A faster sale means less money is spent on holding the property while waiting for a sale. There are, however, a few drawbacks for businesses when it comes to rehab projects. 

The Cons of Rehabbing a Multi-Family Home

Businesses can experience several disadvantages when taking on rehab projects of a multi-family home or multi-unit rehab. The cons of rehabbing a multi-family home include:

  • Buying multi-family properties in areas where other homes are coming onto the market is risky as demand will likely decrease even further due to supply increasing (and competition).
  • Rehab projects can be very time-consuming, depending on the scope and size of what needs to be done. This means higher labor costs which could translate into more significant monthly payments during construction and higher rehab costs.
  • Rehabbed buildings might need renovations again at some point down the road, depending on how well things hold together over time. If your business plans on keeping the property long-term, you should be prepared for additional renovations in the future.
  • Rehabbing can be a tricky process. It’s not just about buying some paint and plastering the walls. There are many issues to consider, like mold or structural damage that might need serious fixing before you can say the unit is “rehabbed.” 

The pros and cons seem equally weighted. To determine if an individual project is right for your business, you’ll need to get the building checked out by a contractor to make sure it’s structurally sound and doesn’t have any major problems with water or mold. 

If this sounds like something you’re interested in, then rehabbing could be your best option for getting that old property up to date while also making some money off of potential future tenants who are looking for suitable properties at affordable prices.

How Do I Rehab Multi-Family Homes?  

As a business, begin by getting the building checked out by a contractor to make sure it’s structurally sound and in good shape. This is where many people run into trouble: not knowing what they should look for during an inspection when considering rehabbing. 

If your property is in good shape and the selling price is right for your budget, a rehab project can potentially make your business a good amount of money. 

You don’t want to rehab a property only to find out later that significant repairs are needed. That can be an expensive project if you decide not to continue with the rehab and instead sell it as is. It may also mean higher vacancy rates or, even worse, potential tenants who could put themselves in danger by living in unrepairable properties. 

So, before you decide on what type of rehab will work best for your business needs, make sure to have an inspection done first!

Be sure that any potential tenants interested in renting space are also aware of all the specifics of what kind of rehab has been done. If they’re not informed, then this could lead to complications down the line, with people either misunderstanding or being dissatisfied about how the property is maintained within their rental agreement. 

What Can Rehabbing Multi-Family Homes Do for My Business?

Rehabbing a multi-family home will likely lead to a steady stream of passive income for your business, especially if the structure you choose to rehab is an apartment complex or multi-dwelling commercial property. Whether your company recoups the money in monthly rental income or by selling the property at a profit, a rehab project will likely add a reasonable sum of money to your bottom line

Rehabs require renovations and upgrades that may include: 

  • New flooring
  • Plumbing
  • Electrical wiring
  • Gutters
  • Roof repair/replacement
  • Landscaping (landscapers are often needed when rehabbing an area for business use). 
  • Insulation or remodeling of kitchens or bathrooms 

These upgrades can cost anywhere from one thousand up to tens of thousands of dollars, depending on what type of rehab work needs to be done and how extensive it is. As long as your business has the budget to complete this work, there’s no doubt that rehab of this kind can give your business a profit.

The Costs of Rehabbing a Multi-Family Home

The rehab cost will vary depending on the size, condition of your home, and various other factors, but you should expect it to cost at least $150-200k for a moderate-sized two-unit building with both units being one-bedroom apartments. 

Rehabbing an entire property will cost more than rehabbing only one room or area. For example, you could buy an unfinished house for less money, but it may require significantly more time and resources to turn into something livable. 

Suppose you can find financing options without too much trouble. In that case, rehabbing a multi-family home could be an excellent way for business owners to make a significant profit with minimal effort.

Financing Options for Business Owners

Several loan programs exist to provide funding and encouragement for those hoping to turn an older multi-unit property into a more livable place. If you’re choosing to finance as a business owner, you might qualify for one type of these loans if: 

  • The building is moderately priced.
  • It requires minor repairs.
  • You don’t have much equity but do want some wiggle room when paying back high interest rates.

Here’s where those “rehab” mortgages come in handy. They offer low fixed rates (and sometimes flexible payment terms) to rehab projects, and they’re available for commercial and residential rehabs.

The first type of loan is a “Rehabilitation Mortgage,” which covers the cost of rehabbing an older home with little or no equity. You can take out one of these loans if you don’t have much money to put into your property yet but want some breathing room in terms of monthly payments—these typically come at a low fixed-rate (which may be adjustable).

You’ll need at least five percent down on your rehab loan, but more can be put down if needed—and there are no mortgage insurance premiums with these programs; both types of rehab mortgages come at competitive rates.

Microloans are loans in small amounts from private investors or banks as well as non-profits. Microloans can offer excellent rates and flexible terms that will maximize any profits made at resale. These loans typically range between $5,000-$20,000 and often come with low origination fees (you just need to cover closing costs). You could also find grants for rehabbers who have little equity but show a strong ability to repay the funds over time.

If you cannot find financing options or have enough capital that you don’t require financing, rehabbing can still be an excellent way for business owners to make a good profit and get in on the real estate market by purchasing property at reduced prices. 

A multi-family home provides income sources when everything is complete. You’ll have something of value when it’s finished—both as collateral if you need financing again or simply as rental properties to generate more revenue than ever before! 

How Long Does Rehabbing a Multi-Family Home Take?

The timeline of a rehab process depends on the scope of work necessary for your rehab. Large multi-unit dwellings can take anywhere from one to three years or more, whereas smaller units can take less than six months.

Rehabbing a multi-family home can be an exhausting process. The rehab time for rehabbing such as these buildings is around 180-240 days, including significant building inspections, design updates, and permits. 

After the rehab of a property has been completed, it will include new paint with updated flooring in each unit and some roof repairs/replacements on selected roofs that have reached life expectancy, plus other general maintenance items found along the way. These are just some of the things needed to complete a successful rehabilitation project, but there’s always more. Rehabbing a multi-family home takes time.

How Your Business Should Choose a Contractor to Work with

Contractors can significantly affect the timeline for your company’s multi-home rehab project. Businesses must be careful when choosing a contractor. Many business owners will go through great lengths to find the right company for their business needs.

Use reviews, recommendations from friends and family, or just do some online research about potential contractors before reaching out to them. Here is what you need to know when looking at potential companies:

  • You want someone with experience who understands your business’s specific needs.
  • It should also be noted if they specialize in certain things (i.e., plumbers can’t fix electrical).
  • Consider how much turnover there has been within the business and how long it takes for work orders/contracts to get completed.
  • Do not hesitate to ask about their future business plans or past history to be sure you’re working with a credible company that is going to stay in business long-term and not fizzle out before your rehab is complete.

The more transparent a company is with any issues, such as lawsuits or bad reviews, the better off you are. You want to know when there are problems and if those have been resolved before signing anything.

It’s always best to do some research on potential contractors before hiring them. Many caveats could be overlooked during this process, but some basic things should be checked out before making an offer. 

What Type of Businesses Should You Work with?

Choose trusted businesses to work with on rehab projects. Multi-family rehab projects can require an array of services, from business loans to electricians and plumbers. When it comes time to get business done, you need various professionals on your team who can offer the best expertise for each part of your project! 

Contractors and tradespeople who specialize in this type of work on rehabs like plumbers, electricians, roofers, etc., are an ideal choice for you and your business. They’ll usually offer better pricing because they’re used to getting business from people like you. Choose trusted companies that have experience working with multi-family housing or businesses that specialize in rehab.

Interior designers are great investments toward the ending stages of your rehab project. You may need to rework your space plan because of the condition of the property (or if it doesn’t have a clear layout). If not, then the interior designer can help with color schemes and creative solutions for living spaces like kitchens, bathrooms, and bedrooms. 

Landscapers & exterior contractors can ensure that your rehab project has the highest amount of curb appeal. They’re experts at making any building look good on both the inside and outside! From installing new plants in front to just putting in some fresh mulch, there’s something they can do for every business owner who needs their property looking its best, even when time is limited!

Real Estate Investors can offer extensive knowledge and investment power. They’ve done a lot of these projects in the past and know what to expect. They typically have their contractors familiar with rehabbing multi-family properties, so you can reduce your risk by having them do part or all of the work for you.

From extensive knowledge of products to proven processes, selecting the right business for rehab projects is paramount.

Contact Superior Commercial Solutions

When deciding whether rehabilitating an old multi-family residential property is worth it, many factors come into play, such as your budget constraints and how much space you need on the other end. There are also several benefits when renovating old buildings, which may be homes like lead paint removal services, accessibility updates including wheelchair ramps, mold remediation options available depending on what type of rehab you’re doing, and much more.

If this sounds like something you’re interested in, then rehabbing could be your best option for getting that old property up to date while also making some money off of future tenants looking for suitable properties at affordable prices! Superior Commercial Solutions (SCS) is an industry leader in supplying and installing cabinets and quartz countertops for Multi-Family, Student Housing, Assisted Living, and Hospitality projects across the United States. If your business has decided to take on a rehab project and wants it to be worth your time, energy, and money, contact us today for more information.