Value-Add Real Estate

Value-add real estate refers to properties that are intentionally purchased with the goal of increasing their value and/or cash flow through targeted improvements, renovations, or more effective management. This is a well-established and commonly used investment strategy. Investors typically acquire these properties at a lower price due to their current condition, inefficient operations, or underperformance relative to similar assets in the market.

The value-add strategy involves deliberately identifying and executing opportunities such as:

Renovations: Upgrading physical aspects of the property—such as kitchens, bathrooms, flooring, or exterior features—to improve functionality and appeal, allowing for higher rents or resale value.

Operational Improvements: Implementing better management practices, including reducing vacancy rates, improving tenant screening and retention, adjusting rents to market levels, and increasing overall operational efficiency.

Adding Rentable Space: Increasing income potential by creating new units or livable areas, such as finishing a basement, adding bedrooms or bathrooms, converting unused space, or constructing an accessory dwelling unit (ADU).

By intentionally executing these strategies, investors can increase a property’s rental income and overall market value. This process of buying, improving, and repositioning properties is a standard practice in real estate investing and is a primary way investors generate higher returns.

A simple example of this is a multifamily property I purchased. After reviewing the financials, it was clear that rents were significantly below market. The previous owner hadn’t adjusted them in years, largely due to a hands-off approach and not actively tracking local market rents. This is sometimes referred to as a “tired landlord” situation.

I was comfortable purchasing the property at the seller’s asking price because I knew there was a clear and realistic path to increasing rents by approximately 25–30% in a relatively short period of time. Today, that property is one of the strongest performers in my portfolio. At first glance, however, it could have easily been passed over as a deal that “didn’t cash flow.” In reality, it wasn’t a poor performer - it was simply a classic value-add opportunity. These opportunities are everywhere if you look around with an open mind!