Prior to developing the renovation plan it is important to understand the goal of the renovation, which for the typical owner or management company is to:

•  Maintain or increase market share
•  Increase rents
•  Determine whether to reposition or redevelop
•  Increase NOI
•  Increase ROI for

Having performed hundreds of millions of dollars worth of renovations over the years both as a contractor and as an owner; I have yet to find a company that has a rock solid development planning process in place.  I have found, that in most instances, the plan is developed by the operations, asset management or rehab group or left to the discretion of the general contractor, being told, "Do it like the last renovation you did for us". The absence of proper planning due to lack of relevant information often leads to implementing the wrong strategy, higher costs, frustration and unmet expectations of owners, residents and investors.

So what is the formula for a successful renovation?

1. Understand the needs and desires of the current and target resident.
2. Build a plan to reach the goals of the company.  It's not about a faster and cheaper renovation. It is about increasing the NOI or ROI or simply delivering the right product to the right market. 
3. Create a detailed scope of work and relevant bid documents to get accurate estimates.   Therefore, is there an understanding what your contractor needs from you to provide the most competitive bid to meet your expectations?
4. Provide training to the onsite staff about the renovation process, i.e., how to manage turnovers, residence, walk throughs, punch lists, pay applications, etc..
5. Actively value-engineer your project to save money during the renovation.
6. Develop a sound and comprehensive capital planning budget.
7. Incorporate construction closeout documentation that provides operations and maintenance with valuable information about warranties, part numbers/specifications for ordering replacement parts.

Whether you are a small or large owner or management company, developing the correct plan is the most important phase of the redevelopment strategy and is often the most overlooked. The industry lives and breathes NOI & ROI which is usually backed in sound logic, however when it comes to renovations the logic does not follow through.  Your renovation may come down to your local manager making decisions based on limited information or personal preferences or your renovation decisions are made by committee not backed by sound data.

I am a big advocate of a Needs Assessment.  The Needs Assessment is the first phase of obtaining critical information and will answer the following questions:

• Who is the target market?
• What does the target market desire?
• Should you reposition or renovate.
• How should renovation funds be prioritized to achieve maximum NOI and ROI?
• What is the maximum achievable rent based on renovation or repositioning?
• What is the best time table for implementation?
• How can you gain a competitive edge by designing the space and the amenities to appeal to your target market?

The ultimate goal of the needs assessment, aside from gaining valuable information about your property, your resident, your competition is the development of a relevant and accurate Scope of Work (SOW).  A good SOW will clearly outline the project, allow for better competition, result in clear expectations, accurate pricing, time savings and starts the project off on the right foot. It is typical to receive bids lower bids and reduce the project cost by as much as 10-15% by providing the contractor a clear and complete scope of work.

So look for the next blog; The Scope of Work.