What Is Value-Add Real Estate Investing?

Also referred to as value-oriented real estate investing, value-add real estate investing is a commercial real estate (CRE) investing strategy that involves an investor purchasing a commercial property with existing income but requiring physical and operational improvements to tap into its full income potential. The income-generating potential of most CRE is the determinant of the property’s value.

Thus, by increasing its net operating income (NOI), investors increase its valuation too. After they achieve this, they can go in several directions, including refinancing the property, taking out equity from the higher-valued property, keeping it for a long-term hold, or exiting the deal via a disposition. Whichever option investors choose, both they and the owners capture the equity built via the improved property value.

Value-add real estate is one of the four real estate investing strategies CRE investors can pursue, along with core properties, core-plus properties, and opportunistic real estate. Each comes with a different level of risk and earning potential.

Core properties are usually well-established premium properties at premium locations with quality, long-term tenants. They entail the lowest risk and lowest but steadiest returns. Next come core-plus properties, which are also top-quality stable assets at attractive locations. They are slightly riskier than their core counterparts but can bring higher returns with minor physical improvements, tenant repositioning, and existing cash flow stabilization.

Value-add real estate can involve more considerable improvements, such as market repositioning and redevelopment. Thus, it is even higher on the risk spectrum but provides investors with greater capital growth potential and bigger returns. Opportunistic real estate is the riskiest strategy with the highest returns potential. Most often, these include land acquisitions, ground-up developments, and property conversions.

When looking for a suitable value-add property, CRE investors should consider characteristics such as below-market rents, low economic occupancy (how many people pay rent) and occupancy rates, physically obsolete exterior and interior, and poor property management.

When selecting ways to increase a property value, value-add real estate investors should make several important considerations. The primary one is the property’s positioning in the local market and its competitive power for tenant acquisition compared to similar properties in the vicinity. Others include identifying the main drivers of the property’s NOI and areas of improvement. Some examples of value-add real estate improvements are changing the property management company, upgrading the interior and exterior, and repositioning or rebranding the property.

Depending on the amount of work and capital investment a property requires to increase its value, value-add real estate can fall into three categories: light, medium, and high value-add.

Light value-add usually involves performing any deferred maintenance and affordable physical improvements. It requires minor capital investments but significantly improves the property’s look both inside and out. Light value-add interior improvements may encompass repainting units; replacing electrical, lighting, and plumbing fixtures; and adding new furniture and carpets. Among the exterior enhancements are refreshing painting, re-striping parking lots, renovating amenities, and upgrading the landscape.

Medium value-add improvements build on their light value-add counterparts and include more costly enhancements, such as complete renovation of bathrooms, kitchens, and roofs, as well as replacement of heating, ventilation, and air-conditioning systems. For many successful CRE investors, medium value-add real estate yields the best return on investment.

Finally, heavy value-add improvements include both light and medium value-add upgrades but may also involve sweeping renovations. Examples include adding or removing adjacent buildings and investing in new luxury amenities such as community centers, rooftop decks, and swimming pools.

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Common Driving Mistakes in Golf and How to Fix Them

In golf, a drive, also called a tee shot, refers to a long-distance shot hit from the tee box (a closely mown area with boundaries defined by the tee markers and the cut of the grass) and intended to move the golf ball far down the fairway (a closely mown area between the tee box and the green) toward the green (an area with grass cut even shorter). Golfers usually use drivers for driving. Drivers are golf clubs with the smallest loft or the angle between the clubface (the clubhead’s forward-striking surface) and an imaginary vertical plane perpendicular to the ground. The smaller a club’s loft, the more powerful the club and the farther the golf ball can travel when hit with it.

Driving requires balancing accuracy and distance and can be challenging for golfers of all levels. Some of the most widespread driving mistakes relate to incorrect stance, wrong ball setup, level shoulders, and poor alignment.

Finding the correct driving stance can be difficult. On the one hand, drivers are the golf clubs with the longest shaft (a golf club’s middle part between its clubhead and the grip), which creates the longest swing, and, thus, requires a wider stance to control the swing properly. On the other hand, a wider stance can result in swaying back and through the swing, which, in turn, can cause inconsistencies in ball flights and shot patterns.

Using alignment sticks (long, thin training rods that help golfers check the accuracy of their bodies and club position and align them to the intended target) during shot practices is a great way to achieve the correct driving stance. Professionals advise placing the sticks on the chosen target line and ball position and taking a shoulder-width stance. Golfers should aim to maintain a stable base as they make several swings. Doing so will allow them to rotate their bodies properly, enhance their balance, and prevent them from moving off the ball.

Correctly setting up the golf ball is also critical for a successful drive. Many novice golfers position it too far back, in the center of their stance. As a result, they hit the ball at the low point of their swing or down on it while they should be hitting it up. Hitting down with a driver leads to higher spin and shorter distance.

The ball should be slightly forward in the golfer’s stance. Several ways exist to determine the correct setup. One example is placing the ball off the inside of the lead arm (for right-handed golfers, this will be the left hand). Another example involves tracing an imaginary line straight out of the inside of the lead heel and positioning the ball on that line.

Leveling the shoulders can also cause golfers to hit down on the ball and ruin the drive. To prevent this from happening, they should tilt their shoulders slightly as they take their driver setup. The lead shoulder should be slightly higher, and the trail one slightly lower.

For right-handed golfers, these are the left and right shoulders, respectively. Tilting the shoulders will help to hit up on the ball and achieve a good, high drive.

Finally, the long shafts of modern drivers force golfers to stand farther away from the ball, hindering proper alignment. Again, using alignment sticks can help. They allow golfers to see how they should position their feet according to the chosen target.

Professionals also recommend asking a fellow player to check the lines of the hips and shoulders from behind. The reason is shoulders and hips remain open even with properly aligned feet, which, in turn, can cause a slice. A slice occurs when, due to sidespin, the ball dramatically curves to the right or the left, depending on whether the golfer is right-handed or left-handed.

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