You know the drill: If you build it, they will come. What’s true in spiritual baseball movies is also true in real estate, though, in this case, we can expand the lesson to include renovations. The Los Angeles Times reports that downtown L.A.’s famous One Bunker Hill Building is receiving a makeover to increase the former Southern California Edison Building’s overall value and leasing ability.1 Once the renovations are complete, the owners hope to attract entertainment, media, and technology lessors, some of the most desirable tenants to real estate investors.
We’ve seen how funding the renovation of industrial buildings has helped to boost California’s industry. The same holds true for commercial and residential rental properties, as the renovators of One Bunker Hill assuredly know. By retrofitting outdated buildings with modern and environmentally-friendly technology, you too can maximize your profits on your next property sale.
Makeovers Increase Property Market Value
While One Bunker Hill is not a distressed piece of property, the building is in need of some TLC to boost its revenue-generating capability. Imagine you’re the real investor who purchased this dream property. You could tear out the drop ceilings and pull up the carpet to reveal the original design and accents, and remove the glass walls and roofs installed in the 80s from the original terraces to bring back some desirable outdoor space. You know that historic buildings like the 1930s-era One Bunker Hill have good bones. By updating it to meet contemporary environmental standards and outfitting those old bones with some modern comforts, you could maximize the selling value of the building and not only get your investment back but increase your profit exponentially.
Retrofitting with LED lighting is one environmentally-conscious update where investors see some of the highest returns on their investments. In an article in LEDs Magazine by the General Manager of Solid State Capital Services, GM Don McDougall pointed out that to update lighting to newer and cost-saving LED lights cost one of their clients $60,000, yet increased the property’s market value by $426,000— over a 600 percent increase in value. By updating the lighting, the client reduced the average energy usage by nearly 80 percent, which cut the building’s cash flow requirements significantly.2
McDougall reported similar property market value increases for other clients that underwent LED retrofits, including a restaurant chain that saw its building market value increase by $4.8 million, and a warehouse distribution company that upped its property market value by $650,000.Those are significant increases in property market value for all three companies — with a little bit of knowledge, you can duplicate their efforts to increase the value of your own properties.
Makeovers Increase Selling Value
The real estate market continues to climb nicely out of its 2007/2008 crash, and for investors who bided their time through the slump, it’s a perfect moment to join the market again just as it’s taking off. If you’re short on upstart capital, a buy-and-hold loan can give you the freedom to act now. You could sell right away, or rent and use the leasing income to pay off the Socotra loan. When the time is right, you know you’ll make a nice profit on the property because you restored it to its original beauty, implemented cost-saving retrofits, and increased its overall value.
Buy-and-hold loans are designed for projects just like the One Bunker Hill renovation. They allow investors to purchase residential, commercial, or industrial properties that need renovations and then utilize as income property. Once the time is right, the investor sells for a profit and moves on to the next project. Socotra Capital issues buy-and-hold loans regularly to investors like those who purchased One Bunker Hill. Fill out our lending form today to apply for your buy-and-hold investment loan.
- Los Angeles Times, “At One Bunker Hill, 1980s Improvements Will Give Way to 1930s Charm,” http://www.latimes.com/business/la-fi-one-bunker-hill-20151008-story.html ↩
- LEDs Magazine, “Commercial LED Retrofit Project Justifies Project With Market Value Increase,” http://www.ledsmagazine.com/articles/iif/print/volume-3/issue-1/features/renovation/commercial-led-retrofit-justifies-project-with-market-value-increase.html ↩