1. Inflation
a general, continuous, and constant increase in the level of prices in the country, and a continuous decrease in the value of the local currency. In the multifamily world, inflation makes it possible to update rental prices upwards. Of course, the rise in material prices and the cost of labor make the construction of alternative properties more expensive. For the most part, this has a positive effect on the prices of multifamily assets.
2. Market forces
supply and demand. Sometimes there is much more demand for a product or service than supply, so the value of the product or service increases. It’s mostly, not up to us. Thorough research work can identify long-term trends that can be ridden, like a surfer catching the right wave.
3. future potential
for value increase due to improvement. For example, buying multifamily that has more building rights, and after a while exercising the rights by building or selling them, and producing an increase in value.
4. Physical appreciation – comes to play when we renovate and invest in the property: paint, roof replacement, floor, kitchens, etc. By physically appreciating the property, we increase the value of the apartments and can increase rents and thus increase the NOI (net operating income) which is the key factor that affects the value of the property
4. Physical appreciation
comes to play when we renovate and invest in the property: paint, roof replacement, floor, kitchens, etc. By physically appreciating the property, we increase the value of the apartments and can increase rents and thus increase the NOI (net operating income) which is the key factor that affects the value of the property.
5. Administrative appreciation
The favorite appreciation of Valore’s management team is administrative appreciation. why? Simply because it focuses on raising the NOI by reducing expenses – and this is a process that does not require spending money at all, simply streamlining administrative efficiencies and the implementation of procedures and protocols.
Bonus: When is a property considered stabilized?
Once the appreciation process has begun, the operator prepares a neat file that includes the entire process from start to finish, the file contains the work divided into months and weeks and of course also the budget for each period.
The file synchronizes with all the tenants’ contracts in order to understand when tenants end a contract, and their units can be renovated. And of course, there is close weekly monitoring of progress. When is the property considered stabilized?
Depends on who you ask. According to the banks, a stabilized asset is an asset that complies with the 90 by 90 “law”, which means 90% occupancy over 90 consecutive days.
But in our view as syndicators, a stabilized property is a property that has reached peak performance, has completed the repositioning process, all rent increases have been made, and is currently at its full potential in line with the business plan.
And that means you can move on to refinancing.
