When you choose to invest in real estate, you’re doing so because of the growth opportunities, not because you’re looking for more work or like being awoken in the middle of the night by a tenant emergency. No, you’re looking to turn a profit.
While there are many types of properties in Franklin County you can invest in, one type that can offer growth opportunities and increase your cash-flow potential is those that come with value-add opportunities. Read on to learn more about value-add opportunities in multi-family properties and what to consider before investing in this type of property.
What Are Value-Add Opportunities in Real Estate?
Anyone who’s looked at a multi-family property in Columbus knows they come in a variety of conditions. Some are relatively well-maintained, others are in complete disrepair, and many fill the vast spectrum in between.
A value-add investment property falls closer to the lower end of this spectrum. It is not operating at its fullest potential and could use some work. Perhaps the units are dated or there are structural elements that need repair. These value-add properties are prime candidates for those interested in taking on some construction work to make improvements (i.e., add value to the unit). By doing so, the goal is that you will be able to increase monthly rents and in turn, earn a greater ROI on your investment.
Factors to Consider Before Investing in Multi-Family Value-Add Opportunities
Successfully investing in value-add opportunities requires not just careful consideration of the Columbus market but also an understanding of construction costs and processes. It takes a lot of time, effort, and money to flip a multi-family property, and while doing so, you’re not generating any rental income.
Here are some factors to weigh before going all in on a multi-family investment that needs work.
- The property’s location – You can’t assess value without looking at location. The more desirable the location, the higher the rent you will be able to command, especially once upgrades are made. A good location also means you’re more likely to attract quality tenants who wish to stay in your units longer and thus reduce your vacancy rate.
- The property’s condition – If you’re looking for multi-family opportunities to improve, you’ll want one with outdated features or needing maintenance attention. Older properties with strong potential are what you should have your eye on, but be realistic about improvement costs. They’re likely more than you think. And if you plan to hold on to the property for a long time, it makes sense to invest in good-quality items that will last a long time rather than a cheap flip that will soon require repeat upgrades.
- Market and financial analyses – As with any investment, run the numbers. Conduct a competitive analysis to compare the property you have your eye on with other multi-family properties in the area. Also, take a look at the financial performance of the property in its current state. A cost-benefit analysis will help you assess if its financial projections align with your investment goals.
If you’re considering investing in a value-add multi-family property in the greater Columbus area, do your due diligence. This type of property comes with significant risk and requires a commitment on your part to see the upgrades through as efficiently as possible. Our team at RL Property Management can help you conduct a market analysis to better understand the growth potential of a given property and offer other tips to boost your NOI. Get in touch with our team to learn more.
