Value Add real estate acquisitions are properties that require improvements which will enhance their value and ultimately increase its cash flow. Certain real estate investors target these properties to earn higher returns than normal, stabilized properties. This type of investment requires expert knowledge identifying the areas of the property where value can be added and failure to determine accurate costs, timelines and absorption to stabilization can result in lower or disastrous returns. However, buying at the right price after identifying areas to increase the value, can result in higher yields.
Value add components of a property deal can include renovations, repairs, building reconfiguration, additions, subdivisions, vacancy lease ups, assemblage of other properties, zone changes, debt restructuring to name a few. The analysis can be substantial and if done too quickly may result in missed items or underestimation of costs.
Once the opportunities for improvements have been identified it is necessary to perform a back of the napkin analysis to determine costs and if the price of the property will support the costs along with a projected lease up or sale.
We target properties that have elements of value add along with a method of identifying purchases ripe for negotiation.