Pre-Closing Steps to Create a Great Residential Investment

An investor can easily step back after placing a project under contract and feel that until closing that there is little or nothing to do. Unfortunately, this is a critical mistake. Nothing could be further from the truth. Investors have to look beyond the closing activity and focus on their reports, market studies, and other information to develop plans, budgets, capital improvements, schedules, staffing and service additions to boost earnings, reduce costs, and otherwise secure the investment.

Sometimes thousands of dollars per month can be cut with a program of leak repairs.

Developing plans to place units on individual meters can net $30 to $60 per unit in additional profitability.

Examining the current management’s operation and developing techniques to add value that converts to higher rents or higher occupancy can net huge results. In one case I’ve seen effective occupancy was 84%. By changing office hours effective occupancy increased 10% and increased the property value by more than 50% because of the marginal effect on profits.

Creating plans to accelerate changes to the property to reposition or to turn over underpaying residents can create huge increases in revenue, profitability and value. Couple this with a plan to sell the property quickly after taking over and very large gains can be netted to the investors in a very short period of time.

In another instance the property had several undeveloped unoccupied plots. Keeping these off the note actually increases the value of the property because in general value is based upon profitability for the rented units. In turn, the buyer can turn around and potentially sell plots to achieve an immediate gain.

Ideas like these are found by walking through the historical expenses, old utility statements, the appraisal, the engineering report and surveys. Next, you should examine the properties zoning and see what opportunities this may offer.

The thorough buyer will spend days investigating competing properties management and marketing. Often times, there are differences that can be exploited for real gains.

Finally, traffic studies should be reviewed and frontage compared. If a property can be acquired with strong traffic seeking signage permits often can creates significant revenue for investors.

In short, the pre-closing period is an opportunity to examine your asset and with imagination, dedication, study, and intense review profits can be increased, risks can be reduced, plans to make early gains developed and the general asset value heightened to the advantage of you and your investors. Good luck and great investing!