When it comes to value-add business plans, one key question often lingers in the minds of investors: Is there a Return on Investment (ROI) in renovating a unit?

The ROI will allow you to determine if the renovation dollars make financial sense based on the rent premium you are expecting post renovation.

So if could achieve a $600 rent premium on an apartment unit, but you had to spend $20,000 to get it, does this make financial sense?

A $600 rent premium would have an annualized gain of $7,200. This would produce a return on investment of 36%, or take almost 3 years to earn back.

An acceptable ROI % will vary from different investors. Most companies target between a 25% - 35% ROI.

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📈 Chart of The Week

While recent job gains were below the monthly average of around 399,000 jobs added in 2022, employers hired more worker in September 2023 than they did prior to the pandemic. From 2015 to 2019, the U.S. economy added an average of roughly 190,000 jobs each month.

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