The Value Add strategy can take many forms. Essentially, it is adding value to a property to create a higher value in the property. As we know, commercial properties get its value from the Net Operating Income divided by the Cap Rate. Adding value to a property could mean reducing expenses, increasing income, or improving the operation efficiency of the property.
For example, in one of our properties, the units were larger than the comps in the area. There were also a large number of bedrooms compared to other complexes in the area. Many families lived in this complex compared to other properties. There was also a lot of deferred maintenance, meaning the condition of the property was not up to par for the area. In this business plan, we decided to add a grilling area and a playground for the residents as well as improve the aesthetics of the property. This brought the tenants joy and it became more of a community, rather than an apartment complex. When tenants feel like there is a community, they are more likely to renew their lease (decreasing vacancy) and refer their friends to the community. Win-win!
Other ways to add value to a property would include bringing property-wide internet to the property. Imagine moving somewhere and the internet is already active! This allows tenants to not have to take time off of work or schedule installation of the internet services. Tenants love this option because it makes it easier for them. Better yet, the cost of the internet is less than paying a local internet provider. Even better, we buy in bulk and get income from the internet which increases the valuation of the property.
There are many more ways to add value. In some cases, it is by sprucing up the landscaping, common areas, or even tackling pest issues that the previous owners did not address. In one of our properties, there are public reviews of a roach problem. Our team addresses the issues so tenants WANT to live there. We are not landlords, we create safe communities.
Our team creates customized business plans for each property. Sometimes that means reducing expenses, sometimes that means increasing income, and sometimes that means operating more efficiently. In all cases, our team spends hours coming up with a plan to create the most value for our residents and our investors. It has to be a win-win scenario for all parties involved.
To learn more about how we add value to properties, please visit our Knowledge Center. To find out how you can passively invest, please schedule a time with us or contact us, and we will reach out to you.