The Willow is an all brick residential apartment building located at 514 E Willow St, Syracuse NY that was acquired by Renpro in 2024 for plans for major interior renovations and exterior upgrades. The apartment building contains 3 sections of 11 apartments each, most of the apartments are on the smaller side. The plans for renovation include updating all units, new kitchens, bathrooms, flooring, paint, & lighting.
We love buying these old historical buildings but they do come with some downfalls. Although the exterior construction of the building is built with solid brick, the interiors were often framed with rough cut lumber. This style of lumber (although strong in the beginning) has a tendency to settle and change shape over it’s lifespan. This usually doesn’t mean that the building is unsafe, you may have seen cupped, bowed, or twisted lumber at Home Depot even. The changing in the shape happens due to many factors but the largest issue is that it can make even a nicely renovated unit seem less inviting.
Although there are ways to combat the un-level floors from the rough cut lumber, it can be cost prohibitive on this style of apartment building. Due to the apartment layout configuration, the acquisition price, and the ARV (after repair value) there is a maximum renovation budget which in this case is about $940,000.00.
In the future I will write a more in-depth post on how we determine these figures but the short version is that the purchase loan is typically 75% of the purchase price and the rehab loan is 100% of the rehab amount. However, the sum of these two figures may not exceed 75% of the ARV. The reason for this is because the renovation loans that our company utilizes to acquire and add value to our acquisitions are bridge loans, these loans must be refinanced typically within 12 months. So when we go to refinance, we want to make sure that our existing loans are less than 75% of the ARV. This will allow us to refinance and recapture our down payment and payoff the entire renovation loan.
We have determined that the ARV for this property will be $4,036,875.00 and this is based on an 8% cap rate. The NOI (net operating income) will be $322,950.00 and the total profit after debt will be $85,902.00. We could request a higher ARV when the project is done, I reckon we could get a valuation closer to 6.5% cap when we are done but that will increase the loan amount and reduce our income. Sometimes it may make sense to trade profit for immediate cash from a cash out refinance but we feel that it is safer to keep the $85,902.00 profit for this building.
