Value-add
An investing strategy of buying a property with under-market rents, deferred maintenance, or weak management, then improving it to raise income and value. Common in small multi-family.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
A value-add buyer wants a building with below-market rents or deferred maintenance they can fix. If your rental is one, the buyer prices the upside and pays for part of it, which can beat an offer from somebody who sees only the problems.
Part 2 of 4
A simple example
Your six-unit has rents $200 under market and a dated exterior. A value-add buyer offers $60,000 more than a buyer who priced only today's income.
| What the buyer sees | What they pay for |
|---|---|
| Rents $200 under market | Some of the future rent |
| Deferred maintenance | A discount for the work, and a premium for the result |
| Weak management | Cheap to fix, so they pay for the upside |
Value-add buyers buy problems they know how to fix. The problems are why they pay more than they look like they should.
Part 3 of 4
What people get wrong
That a tired building only sells at a discount. To a value-add buyer the tiredness is the opportunity, and it is priced as one.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
One piece of your sale. Here is where all the pieces live.
In your room, this word explains itself where it appears.
Keighbor keeps your whole home sale in one place and defines every term like this one right where you meet it, in the step you're on. Free to set up, with or without an agent.