Buy, Uplift, and Hold

A ‘buy, uplift, and hold’ strategy is a strategy to acquire an undervalued property, invest in renovations that will increase revenue, then hold on to it for the long term. This strategy focuses on finding a diamond-in-the-rough and creating value for the long run by adding/upgrading units, services and/or other revenue streams.

 

Here is a brief overview of a buy, uplift, and hold strategy:

  

  

 

 

 

 

 

Goals

  • Purchase a property that is under the local market value and invest in renovating it.
  • Find a property that can generate multiple income streams. For e.g. converting it from a single-family home into a duplex by renovating the basement into an income suite. 
  • Purchase a property that will increase in value over a long period of time (typically > 5 years).
  • Income from the property will cover all of the direct property expenses.

Tactics 

  • Search MLS for stale listings, price reductions, terminated listings and properties with comments like ‘As-Is’ or ‘for Investors, renovators’
  • Search for off-market deals through real estate agents and wholesalers.
  • Use local comparables to assess how much market uplift potential there is.
  • Look for conversion opportunities: single-family to duplex or triplex.
  • Ideally the property should be vacant so that you can set rent at market levels.
  • The property should be located in a market that has good economic indicators that point to long-term growth: diversified economic, growing population, education institutions, progressive city council.
  • Low vacancy rates and a tenant profile that suits the property location and type. 
  • Market rent rates should support funding this property and all its expenses including the mortgage, property taxes, maintenance, and possibly capital improvements. 
  • Cash Flow: the property should pay for itself with some buffer to cater for fluctuations in rent rates, expenses and possibly rising interest rates. 

Exit Strategy

  • No Exit – hold the property and pass it along to the next generation.
  • Sell only if: 
    • You need to liquidate or you no longer want the property.
    • Major changes in the property or market make it too costly to hold.

Critical Success Factors

  • Good team and network: under-market properties are harder to find, especially on MLS.
  • Knowledge of zoning laws that guide what is possible with the property.
  • Local market knowledge of property values, rental rates, and tenant demographics.
  • Having a plan for property management (self or contracted).

Suitable Properties

  • All residential property types: condos, detached and semi-detached houses, duplexes, triplexes, multiplexes. 
  • Commercial 

Other Considerations

  • Consider other income streams – parking, workshop, laneway houses, sheds/storage.
  • Financing: you can look at refinancing at a higher appraised value 6 months- 1 year after the renovation to utilize the profit in another purchase (like a BRRRR strategy).
  • Financing: there are many financial tools you can use to fund the renovation.
  • Capital expenses: as this is a long-term investment, it would be wise to set aside (allocate) a portion of monthly funds to pay for major improvements such as a new roof, new appliances, HVAC, etc. 
  • Taxes: taxes on rental income 
  • Understand your rights and responsibilities as a landlord. In Ontario this falls under the Residential Tenancy Act.

 

Recommended for:

  • All Investors can buy and hold properties over the long term.
  • Active investors who want to involve themselves in the renovation, maintenance, and upkeep.
  • Passive financial investors who want to loan funds for renovation and uplift projects at a good interest rate.

 

Is a buy, UPLIFT and hold strategy for you? 

Contact me to have a conversation about how to get started in real estate investing. 

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