The purpose of this post is to outline the key functions of the Renovation Costs feature in CREModels multifamily acquisition models. These features should be universal across all acquisition models unless noted otherwise.
The Renovation Costs feature within the Multi-Family Acquisition model allows the user to include the cost of renovations to the property in the calculation of Net Cash Flow. The model provides three tables for organizing Renovation Costs. The default categories (table names) are Materials, Local Labor, and GC Labor, however, these categories, as well as the names of the cost line items, can be renamed as needed. Below are examples of how Renovation Costs could be organized amongst the three provided tables.
Organized by Materials and Labor(default):
Organized by Building/Area:
Organized by Phase:
Cost Inputs: Per Unit Cost or Override Amount
Within the Renovation Costs section, the user has the option to enter costs as either Per Unit values or as total costs for the category.
In the example above, the user has estimated that the hardware costs will be $800 per unit, applicable to 5 units. The user has also estimated that the cost for kitchen appliances will be $35,000 in total.
Note: In this example, the user has chosen to specify the Unit Type that the hardware cost is applicable to. This is helpful when displaying the per unit cost of a line item for multiple unit types (as shown below), however the Unit Type input is not factored into any calculations within the model. Also, if Unit Type “1 Bdrm” is selected in the Renovation Costs input and the user enters a # Units value which is more than the total number of units with the “1 Bdrm” Unit Type, the model will not recognize this and will simply calculate the total $/Amount of the cost as # Units * Per Unit Cost.
Up Front or Over Time
Renovation Costs can also be modeled as an Up Front cost or spread evenly Over Time using the dropdown in the top right corner of the first Renovation Costs table. By default, the model assumes the Renovation Costs to be Up Front and will be added to the Total Acquisition Uses.
If the user selects “Over Time” in the dropdown, the cost of renovations will spread over the time period indicated by the Start Month and Duration inputs. In this example, the Renovation Costs will be spread evenly over 24 months, commencing on Month 1. In this case, Renovation Costs will not be displayed in the Acquisition Assumptions section.
Note: The Up Front and Over Time input will apply to ALL Renovation Costs, however, if set to Over Time, the user has the option to vary Start Month and Duration of the Renovation Costs within each table. In the example below, all costs within the Materials table are to be incurred over the first 3 months of the analysis, then all Local Labor costs are to be incurred commencing in Month 3 over a period of 12 months.