I’m always surprised, when I speak with other so-called “value add” players, how limited their definition of “value-add” is.
There are loads of firms out there running around buying buildings with plans to slap on a coat of paint, re-carpet the hallways, switch out the appliances, and raise rents a little bit.
We are not those guys.
Here’s an example of what we’re doing to a five-unit we’re doing (with permits!) for some fee-for-service clients:
- Total re-configuring two upstairs one beds into wonderful two beds
- Dropping staircases from downstairs one beds into unused basement area and turning each unit into a 3 bed two bath
- Re-configuring the horribly laid-out two bed in back into a wonderful, efficient 2 bed / 2 bath
- Adding private outdoor space, decks, etc.
- Re-piping / re-wiring / etc., so that these systems last for 50-100 years
- Adding all the modern conveniences (washer/dryer, dishwasher, etc.)
You may think this sounds excessive. But, my guess is that, even after paying us a big fee to do the project, our clients are going to be all-in on this building for 9.5x the annual rent and something like $300k / unit for large, efficient units with parking in a premium area.
Does that sound high? The guys building all those units downtown are all-in for something like $400-500k / door for one beds in huge “warehouses for people” where they compete with thousands of other, identical units.
I used to wonder why we get paid what we do on these fee-for-service deals. Now I know.