Taking Your Property To The
Next Level of Profitability.
- Maximize Your Profits
- Add Real Long Lasting Value
- Greatly Reduce Your Financial Risk
A fully maximized property can generate double the income of a well-run average property and 4 to 10 times of a poorly run property. There are hundreds of ways to bring a property to its highest and best use that range from fine tuning to complete remodels and use changes. As Net Income dictates value in multifamily real estate, doubling the Net Income of a property also doubles the value. Therefore maximizing a property to its full potential can be worth Millions, if not 10’s of Millions!
The How
Each property is unique, but all share similar characteristics. Inefficiencies can quickly be found by evaluating the numbers on both the top and bottom lines of an income statement. An analysis of the physical property itself will yield if the property is being used to its highest and best potential. Each property has dozens of items that can be immediately improved upon to increase both income and value.
Examples
of the How
Top Line Analysis
Maximizing current income and adding new income streams, advertising, creating a new tenant base, strategic staging, capital expenditures (remodel), utilizing the 5 senses, etc.
Bottom Line Analysis
Contract and/or service provider negotiations, capital expenditures (HVAC, solar, etc.), Hiring (firing), Material cost negotiations, utilizing City/State incentives, etc.
Significant Results
The difference between a property that has been specifically structured on each line item for profitability is tremendous. Value in Commercial residential property, unlike pure residential property, is determined by net income. Increasing top line income is great but substantially decreasing expenses is even better. Increased income is subject to increased expenses, so each dollar of income may only be worth 50 cents depending upon the type of income. Decreasing expenses is more powerful because each dollar saved goes directly into the investors pocket. When these factors are combined, risk is reduced and reward is greatly enhanced, multiplying the value of the property. Higher overall profits, when reinvested in the asset can also lead to even higher overall profit.
Increased Profit Margins
When looking at true numbers, average multifamily properties range from 30 to 55 percent profit margins, when excluding debt service. With the correct strategies, profit margins can reach 60 to 80 percent. These increased margins can more than double the value of a property.
Repeatable Results
Most efficiency strategies are not unique to one property. They can be recreated to some extent and applied to all. It's not rocket science but it's often not obvious or intuitive. In other words most strategies are not going to be "figured out" without someone that knows how to institute them.
WHY MAXIMIZE?
Whether Selling or Holding, higher profits have massive benefits.
SELLING. The biggest value dictator in Multifamily real estate is Net Income. Highly profitable properties are extremely desirable. Most passive real estate investors don’t want projects, they want a turnkey property that is performing. A fully maximized property will bring the best market price available. Period.
HOLDING. Holding real estate is one of the biggest wealth creators available. Maximizing may not seem as important in this scenario but it is almost more vital with a buy and hold strategy. Higher monthly net income from real estate has many benefits. It means more money to reinvest back into the property or to acquire other real estate. It also allows for higher appraisals, should you plan to refinance for better terms or to take cash out. Most importantly it reduces risk. Holding real estate does have risk. Remember 90% of buy and hold investors were wiped out after the crash of 2008. The investors that survived had low leverage and extremely well-run properties.
end result
once the property has been maximized
Value is dictated by Net Income. If a property’s Net Income increases, the value increases as well. Generally speaking, income and value rise in tandem with each other. In other words, if net income goes up by 25%, so does the property value. Income producing properties are valued using a Cap Rate multiplier. As an example: if the net income of a property went up by $5k per month, at a 5% cap rate, the value increase would be $1.2 million. Every dollar counts when a 20 times multiplier is applied.
If the property is already profitable and the maximization plans are strictly followed a net income increase of 10% to 1000% is possible. If the property is currently unprofitable, it can be made profitable and the returns are infinite!
OPTIONS.....
A thorough analysis entails looking at every aspect of the property’s performance. The evaluation looks at over 300 individual items and identifies which have room for improvement. Some items will yield higher returns than others, it will be up to the client to decide which recommendations to address.
WHAT WILL BE DONE?
THE LEVEL OF INVOLVEMENT DEPENDS ON THE CLIENTS GOALS AND TIMELINES.
Level 1
An exhaustive analysis of both income and expenses. An action item list will be provided to increase income while simultaneously reducing expenses that's unique to your property.
Level 2
Includes Level 1. In addition, the necessary changes will be instituted. I will work the project and help you to achieve the results.
Level 3
Includes Level 1 and 2. Partnership I will become an equity partner in the project. I will invest all needed time to achieve the desired results. Depending upon the project I may be willing to invest capital as well.
About Me
Ben Fetherston has over 20 years experience in flipping properties. He purchased and remodeled his first property in the late nineties and that has been his full time work ever since. He has successfully flipped over 100 properties, many of which had multimillion dollar price points. He developed the maximizing tactics from many years of successes and failures in up markets and down markets. These strategies have made 100% of his projects profitable, even during and after the Great Recession of 2008.
He currently owns and manages the most profitable large multifamily property in all of Colorado.