All Forum Posts by: Chad Lamb

@Chad Lamb I hate that I wasn't able to come to the evening event but glad I was able to meet you at lunch!

@Chad Lamb if you haven't already I'd suggest posting on the FB Group as well...

“Value add” is a term that can mean different things to different investors and different syndicators. To me, the definition would include anything that the investor or syndicator can do to the property to increase the bottom line, i.e. multiple lipstick items (spend amounts of money on specific lipstick items to generate a return on that money from increased rents or more stable tenants, on up to major adds and construction like adding pools, gyms, laundry units, major exterior renovations to turn an outdated older looking building to new or newer, etc. The main thing to realize is that no matter if the value add is lipstick or major, does the cost of the value add generate higher revenues to provide that investment with a positive and meaningful return.

I personally look at value add opportunities as those with major things the investor or syndicator can do to improve the financial performance of the investment. Almost every multi family can use some type of lipstick stuff which I would not consider any major form of value add, but just common sense.

First things first, @Chad Lamb, "value add" has nothing to do with the tenant, it's about adding value to the asset. If you sum-meter water in your property, you've increased the NOI and added value, the tenant isn't getting anything additional. Well, I guess they're getting an additional bill.

Upgrading cabinets, refreshing floors, adding amenities do make the properties nicer to live in for the tenant, but that comes at a higher price to them. You're obviously not sinking in the cash and then keeping rents the same. 

We change out the cabinets, flooring, fixtures, and paint. We build gyms/offices, playgrounds, and dog parks. Our typical scope is about $20,000 per unit all in, including exterior and interior. The one we will be closing a month from now is actually $30,000, and includes W/D install and upgrade to electrical.

Now, what you are noticing is indicative of something. We can afford to do this because we are able to pencil $300+ per unit rent bumps. If not, the cap rate would simply not be there to justify the scope, which brings us to the overriding point - most of what you see people calling "value-add" is not really value-add, which leads to lesser reno scope.

Five years ago - yes. Today - no.