Value-added strategy
What is it?
It is a real estate investment strategy that focuses on adding value to assets through improvements, renovations, or reconfigurations. The goal is to increase income and profitability of the assets over time.
The value-add strategy involves purchasing properties that may not be operating at their full potential and implementing improvements to optimize their performance. This may include space renovations, energy efficiency upgrades, facility modernization, or changes in lease management.
Key aspects to consider
The main characteristics of the value-add strategy include:
- Operational improvements: Investing in reforms or renovations to increase demand and rental income.
- Asset appreciation: The goal is to increase the asset’s value in the market by improving its features and conditions.
- Increased performance: By increasing income or occupancy, the property’s profitability is boosted.
This strategy is less risky than the opportunistic strategy, but it still requires active management to maximize returns. The properties targeted may be in areas with high growth potential but are not yet fully developed or optimized for the most efficient use.
Compared to the core strategy, the value-add strategy offers higher returns but also involves more work and risks related to improvements and property management. It is an attractive option for investors looking to generate medium-to-long-term returns through active involvement in real estate assets.