Improving Renter Standard of Living is Fundamental to Value-Add Syndications

We are not a nonprofit organization.   I have a 501c3 nonprofit that provides free eye care and glasses to the homeless.  And, as a company, New Sight Capital, has given over $25k to charity in 2022 so far.   But, we are a company with the objective of helping optometrists generate wealth growth that does not depend on patients and insurances.  However, deeply embedded in that objective is the purposeful intent to improve the quality of living at every property we engage.

That’s because most of our properties fall under the value-add business model.   The premise with value-add is to acquire a property that has some opportunities for improvement, raise money to physically improve the asset, elevate income from the property, and sell the asset in much better shape than we acquired it.

So, yes, on the surface the financial goal is to improve the income of the property.  However, functionally, it’s the property itself that is meaningfully improved in order to justify the higher rents.  We cannot increase rents without improving the property.  While it’s certainly possible, it’s morally imperative that we specifically address deficiencies at the property to give tenants a better standard of living than the previous owner.

What does that value-add model like?  Over our last 8 value-add assets, we have assigned $15.2 million for physical improvements of the properties.  Those 8 properties account for 1900 units.  This means our budget property improvements amount to over $8,000 per unit! 

This includes improvement to the exteriors of the buildings and remodeling of 70-80% of the unit interiors.   But, with our improvement budgets, we also address deferred maintenance left by previous owners.  This may include infrastructure, roofing, plumbing, parking lots, or electric work.   And, not only is this an improvement cosmetically, but there are safety improvements as well.  In older properties, aluminum wiring is replaced with safer copper wiring.  Plumbing that could cause health hazards is replaced and repaired to higher standards.   Likewise, appliances are often replaced as part of the value-add business model, which improves reliability and functionality for tenants.

All of these repairs and improvements are identified by expert inspectors and contractors as part of our due diligence and comprehensive inspections.  Costs and timeliness for improvements are built into our underwriting.  As a result, we are very intentional in incorporating these costs into our investor returns.  In other words, our value-add model is very purposeful in benefiting both tenants and investors.

Russ Beach, O.D.

Managing Partner