Crushing It in Apartments and Commercial Real Estate: How a Small Investor Can Make It Big by Brian H. Murray

Author:Brian H. Murray [Murray, Brian H.]
Language: eng
Format: azw3, epub
Tags: General Fiction
Publisher: Sackets Harbor Press
Published: 2017-01-07T16:00:00+00:00

The above list is in no way intended to be comprehensive. In fact, it’s nothing more than a small sample. Opportunities to add value to a property are only limited by your own creativity and determination. The more you do it, the more you’ll learn and the better you’ll get at it. Value-add is also a mindset and should be viewed as an ongoing process.

MANAGE NET OPERATING INCOME

Many of the value-add projects you implement will be investments in capital improvements, such as the apartment renovation example earlier in the chapter. What is less obvious is that it’s just as important to create value slowly over time, through much smaller investments made routinely over months and years. Intentionally directing small expenses for the purpose of boosting long-term NOI is called “managing your net operating income,” and it’s an important extension of the value-add concept.

The single most important step to effectively managing NOI is to constantly consider how your decisions, large and small, will affect NOI over the long term. And while it might seem counterintuitive, you should note that in most cases, maximizing NOI over the long term means accepting a lower NOI over the short term. This is because from an accounting standpoint, many value-creating improvements will be captured as expenses. Larger improvements will be capitalized and depreciated over their expected life.

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