Veteran Real Estate Investor Ron Cadman Explains the Multifamily Value-Add

Discovering the hidden value in a property is crucial to a successful value-add multifamily asset acquisition. In the following article, Ron Cadman discusses strategic multifamily asset repositioning. Ron Cadman is co-founder of Investar USA.

One of the biggest trends for real estate investors is value-add multifamily property. This is because it has a significantly lower barrier to entry than new property development, yet can yield consistently exceptional returns. Moreover, it is entirely possible to acquire an older building that may have recently undergone renovations, making upgrades easier and more cost-effective.

The approach to value-add multifamily investment is crucial if you are going to yield the highest ROI. Here are a few things to consider when investing in value-add multifamily rental spaces.

Develop a discerning eye for undervalued property.

While many investors will purchase an existing building only to perform renovations so extensive that the resulting space has every appearance of being a new development, the best prospects are in functionally viable properties in older, under-valued submarkets. Look for submarkets that are experiencing slow yet steady annual population growth, diverse employment opportunities, and possess strong community pride. These communities are more likely to be overlooked than regions experiencing sudden, explosive growth.

Don't anticipate rising rents.

Although rents have been rising steadily in the hotter multifamily markets, this trend may not last forever. When selecting your property, factor in the possibility that rent growth could be moderate, and may even halt. Your property reposition shouldn't rely upon existing resident turnover and achieving an overly optimistic dollar amount per unit. Current rent pricing should be your baseline when calculating the cost of any renovations.

Give your property a bold identity.

Not only should your property be revitalized and given an aesthetic overhaul with new colors and landscaping, but your property's online presence should undergo a refresh, too. Give it a social media rebrand using its new color scheme and integrating neighborhood elements into its web platforms.

Property that makes a statement and that aligns with the personality and heritage of the community is incredibly attractive to the modern consumer.

Ron Cadman has been a real estate investment specialist in the U.S. and Canadian markets for more than 30 years.