A Student of the Real Estate Game


The Key to an Effective Value-Add Strategy: Hands-On Oversight

Mar 31, 2019 | Asset Management, Career, Entrepreneurship, Innovation, Multifamily, Technology, Value-Add

In my role at Atlas, I oversee our value-add multifamily strategy. We buy 1970’s – 1990’s class B value-add properties and seek assets that are priced below replacement cost and comparable sales, where we can add value at then property level, and that are in markets we like long-term.

Adding value is hard. It requires a hands-on approach, local market knowledge, creative-thinking, and great management skills. At Atlas, we’re a lean team and hire 3rd parties to assist with property management, construction management, design and architecture, and marketing. As such, my role is largely comprised of overseeing our 3rd parties, ensuring the project is cohesive and within budget, and we create a product that matches the demand of the market and outperforms the competition.  

That can’t be accomplished sitting behind a computer. It requires spending time at the property, learning about the tenants, and understanding the challenges and opportunities within the submarket. I was recently listening to an episode of ‘How I Built This’ featuring JetBlue founder, David Neeleman. He is one of the most experienced and successful entrepreneurs in the history of the airline business. He attributes a lot of his success to becoming an expert in his field, being passionate, and creating something completely unique.

David told stories of the early days of JetBlue where we would clean the planes, serve snacks, and work the check-in desk. Not because he had to, but because it enabled him to better understand his customers and employees and be a more effective leader.

In real estate, our customer is our tenants. I can’t effectively design a product for our customer without first knowing who they are, how they spend their time, the challenges they face, and what they like to do.

I typically travel Tuesday through Friday each week and spend my days at our properties with the onsite team, touring the comps, and meeting local market participants. Each trip I take away an insight that impacts how we operate a deal or execute our value-add strategy. The combination of local market knowledge combined with experience and creativity drives unique insights. It could be as simple as a tweak to the marketing approach, a new amenity, a resident contest, or a resident event which improves the resident experience or drives additional prospects to the site and improves the performance on an asset.   

I spent the past week in VA, visiting assets in various stages of the repositioning process. One was acquired just a few months ago, while we’ve owned others for years and have already stabilized and refinanced those assets. At one recently acquired property, we’re dealing with legacy reputational issues where the market associates the Property with its previous management and ownership. Since acquiring the Property, we’ve made significant physical improvements and taken a renewed focus on the resident experience. However, it’s our job to educate the market. While onsite, I noticed there are several large façades facing the road which are perfect for banners showcasing the improvements including photos on the newly renovated units, new amenity set, and renderings of the brand-new clubhouse coming soon. The property has great visibility and these banners will go a long way to informing the market that this is no longer the property it used to be.

At another fully stabilized deal where we’ve extracted much of the value-add, we seek incremental improvements which enable further rent growth and help with retention. After spending the day at the property, we decided to consider adding a package system, putting treads on the exterior stairwells, and resurfacing the breezeways. This feedback came directly from our onsite team who deal with residents on a day-to-day basis.

These insights are only gleaned from spending time at the Properties with the onsite teams. There’s no other way to effectively asset manage a deal and gain insights which can be used to more effectively underwrite and acquire new deals. That’s what I love about being an owner-operator. I love the sticks & bricks and the getting my hands dirty. It’s fun, challenging, and rewarding.

What do you find most fun and challenging about value-added real estate deals?