One of the most attractive aspects of the multifamily asset class is the ability to grow the value of the property by improving net operating income, which is the result of improved performance.
Physical Value-Add
The value-add strategy grows the value of the property by making improvements that does any combination of increasing income and reducing expenses. In order to accomplish this, investors typically expect to improve the physical characteristics of the property: exterior paint, landscaping, interior units, etc. These capital improvements should be built into any business plan prior to acquisition. However, there are opportunities that exist to improve the NOI before these types of renovations are complete, and these are what we refer to as operational value-add.
Operational Value-Add
Operational value-add strategies are improvements that the investing firm makes to the management of the property, without respect to the physical improvements described above. These include any of the following opportunities and more:
- Gradually increasing rents to reflect current market rates
- Reducing concessions to new residents and those who renew
- Identifying and capturing other forms of income (parking, laundry, etc.)
- Identifying and eliminating unnecessary expenses such as cable packages for residents
- Reducing existing expenses such as contracts services
This list goes on. Often times, the greatest improvements are made through wise and astute stewardship. Improving the management of high-potential properties creates wealth for both residents through safer, more reliable and friendly-housing as well as for all partners involved in the investment.
About Robinson Capital
At Robinson Capital, we seek great the opportunities described above to invest in communities and improve the quality of housing for our resident base. We know that next to physical improvements and safer housing, management is critical to making a difference. We bring our investors along for the ride in making a difference and diversifying their portfolio with exposure tot he best asset class on the planet. Contact us today to find out how you can invest with us.
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