What are the best ways to improve your properties value in the eyes of the banks?
[{"id": "gj0upny", "text": "I like this question. In my experience, they care way more about the money a property brings in than any materiel defects. Upping rent by $200/mo is way more valuable (at least to them) than a new roof.\n\nWhen I do improvements (new furnace, replacement door/window), I put in high-efficiency units and pay attention to the finish work. However, I do not consider any of these fixes of value to the bank. \n\nThey like seeing that I, on average, increase my rent roll by 3% a year.", "replies": [{"id": "gjaxf6m", "text": "Because it hard to quantify what you did to the property", "replies": [], "depth": 2}], "depth": 1}, {"id": "gj0v247", "text": "The only \"real\" way is to improve cash flow.  So raise rents, reduce expenses, or a combination of both.", "replies": [{"id": "gj0ye0e", "text": "This.", "replies": [], "depth": 2}, {"id": "gj1jicp", "text": "Or find a quality tenant. A mom and pop has a higher cap than a national tenant. Also longer contracts are better than short ones.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gj11pd1", "text": "A bank/credit union primarily cares about the properties cashflow. If it can\u2019t cover the loan payment, then it\u2019s not worth the loan needed to buy or refinance. A stronger cashflow, theoretically, also improves the value of your property when an appraiser takes a look as part of the income approach.", "replies": [], "depth": 1}, {"id": "gj14oyw", "text": "Make Rent go Boom", "replies": [], "depth": 1}, {"id": "gj189l7", "text": "When refinancing, my property manager told me that stainless steel appliances and granite counter tops make a difference. For that reason I added them in my \"cheaper\" rental property. Proof of higher rents also helps and high recent comps will help.", "replies": [{"id": "gj21fuc", "text": "I did commercial appraisals for years and the question ends up being mostly about \u201ceffective age\u201d.  If you haven\u2019t renovated things in 20 years, they are going to have an older \u201ceffective age\u201d which hurts value.  Honestly, even if you do shitty renovations but they are done within 5 years, it makes them more likely to give you an \u201ceffective age\u201d of 10 than 20.", "replies": [{"id": "gj2ozdx", "text": "That\u2019s eye opening", "replies": [], "depth": 3}], "depth": 2}, {"id": "gj236s3", "text": "Those are only good things if they increase rents.  If the cost doesn\u2019t increase rents enough then you don\u2019t create any value.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gj1ahua", "text": "There are two factors to a commercial valuation: Cash flow and Cap Rate. Cash flow has already been talked about. \n\nThere may be ways to lower your Cap Rate and increase the value of the property. Upgrades can make a C-class property a B-class property. Adding square footage/units may make the property more attractive to institutional buyers, who are often willing to accept lower Cap Rates. \n\nThis is a common strategy in self-storage. Buy a mom-and-pop 40k sqft property at an 8% Cap Rate, add 40k sqft, sell the asset to an institutional investor at a 5-6% Cap Rate. Very powerful strategy.", "replies": [{"id": "gj23iy9", "text": "Size only impacts cap rates if you move up in investment tier to attract more regional or national buyers though.  Just something to keep in mind.  Adding 10k square feet to a warehouse won\u2019t attract anyone different, but going from 50k to 250k square feet would.", "replies": [{"id": "gj3xlm4", "text": "Exactly, you have to know what to target.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gj25umu", "text": "Potatoes have eyes. Banks want cash flow.", "replies": [{"id": "gj2co7i", "text": "I have nipples, can you milk me Faulker?", "replies": [], "depth": 2}], "depth": 1}, {"id": "gj2cs2g", "text": "Increase NOI.", "replies": [], "depth": 1}]