One way to improve an underperforming property is through “repositioning”. The property owner can renovate, remodel or redirect its use in order to capture the attention of a new demographic. The resulting repositioned property is often more attractive to lenders if refinancing or other funding is required.

Repositioning can have a positive impact on a problem property, but it is not the solution in every situation. There are five factors to consider when deciding whether or not to reposition a distressed property. Property owners should consult with commercial loan brokers for assistance with evaluating whether or not repositioning is the right course for their troubled property.

1. Location: This can be the most important factor to consider as it is the one which cannot be changed. If the property is in marginal location, no amount of repositioning is likely to increase its growth or occupancy.
2. Analysis: An in-depth and thorough analysis of the property is key. Determine the condition of the property; decide whether it will need infrastructure upgrades and if its amenities will meet the demands of the targeted users. It can be helpful to compare your property to its competitors in order to assess where improvements are needed. Look at both costs and benefits in order to make market-driven decisions.
3. Number and Size of Units: Consider the current size and number of units on the property. Then find out what the market demand is in your area. If units are too big or too small for the targeted users, then that will lead to lower occupancy levels. Weigh the costs of resizing units against the profits to be gained by meeting the needs of more users and achieving a higher occupancy rate.
4. Inspections: Two types of inspections are necessary to assist the property owner with the analysis of the property. First, an inspection of the physical environs must be performed in order to ascertain the condition of the buildings and common areas and determine what improvements are needed as well as the costs associated with them. Once this inspection is completed, a leasing specialist should be consulted to inspect the property from a marketing and leasing standpoint. The results of this second inspection will determine any improvements that are needed to increase potential occupancy of the property.
5. Market Survey: This can be performed with the help of a  Realtor experienced in leasing  this type of property in order to establish the time it will take to lease up the property and  what occupancy rate can be maintained if the improvements are made. This needs to be  specific for your property. It can also be used to show to a lender if loans for development are needed.

When thinking about potentially reposition a property, the property owner should  put together and then carefully evaluate  their existing  management team to determine if they have the necessary resources, skills and experience to effect a successful repositioning. If not, then a team of professionals should be assembled to provide more expertise and assistance.

Private hard money lenders like Montegra are often more willing than traditional financiers to extend loans to borrowers who are interested in repositioning a property to improve occupancy and grow their profits.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.