I have the honor and pleasure of teaching finance for real estate investment and development at the undergrad and graduate school real estate programs at the University of Southern California. I don’t use a textbook. Instead, I work to provide real-life tools, financial concepts and applications for “financial underwriting” to determine the value of an income or development property. This post series will equip investors on the mindset and fundamental building blocks toward value add investing in commercial and residential real estate. From there, in future series we will go in depth into our simple value-add investment valuation approach with real life examples.
At my day job at BrandView Capital, we specialize in valuing property on the basis of purchasing and adding value to it through renovation and leasing, or all the way through redeveloping it and/or converting it to mixed-use. Mixed-use property simply means a property has multiple uses that can potentially earn income. The potential for converting a single-use property, whether occupied or vacant, may or may not be visible to both the trained and untrained eyes.
When you look at a building, you may consider the value of the property by taking it at face value. Sure, that’s one indication of value, but what if you could build on top of a building and that could provide additional value for what is there? What if there was excess land behind it, what would that mean for the value of the property? We look for value where others don’t see it as easily as a basis for our investment decisions.
At BrandView, we are so focused on what can be value. What is there today and what can be there in the future in terms of potential value. This requires a very strong understanding of how to apply critical thinking, to identify the what and the why for a property, based on what its implication on value.
Read next… “Critical Thinking: The What, the Why and Implications on Property Investment Value”