According to real estate investment professionals like Steven Taylor Landlord, one of the more popular and profitable ways of deciding what apartment building to purchase is to identify value-add opportunities. A value-add situation occurs when an investor locates a property that could benefit from repairs or upgrading of amenities. These repairs or upgrades are completed with the intention of the ability to increase rents or an increase in property value that exceeds the cost of any improvements. Here are three things to look for when identifying a value-add apartment building investment opportunity.
Does the Property Need Updating?
Many apartment buildings have gone for decades without significant upgrades. They may have owners that have chosen to defer maintenance for extended periods of time. When these types of buildings come on the market, they can be significant opportunities for the sophisticated investor.
Ultimately, the investor must be savvy enough to know that the amount they invest in upgrades is going to be less than the expected value of the property after the updates have been completed. The increase in property value could come from greater appraised value or the ability to increase rents.