(bright upbeat music) We’re going to use a simple frame to break down what we believe should be prevalent in a value-add investment opportunity. So starting with location. The location of value-add investments should be institutional in terms of, is liquidity provided? We take this very seriously at Origin, that’s why we only target 11 cities. We live in the cities, we know the cities. Even within the cities certain neighborhoods are absolutely institutional and certain aren’t. We wanna make sure that we’re in the proper neighborhoods of those cities to provide liquidity for us and our investors. In terms of vintage you can go invest in an older asset. We tend to not go older than the 1990s but sometimes it’s even 1980s assets if they’re functional. If we buy a 1990s building, which we did in East Austin, and right across the street there’s a brand new, you know, podium built mid rise multifamily, we’re not gonna be able to get the same rents ’cause obviously that’s a brand new construction and ours is 25 years old at this point. But what we’re trying to do is invest significant capital into that building, our building, so that it can compete with that and the spread is much, much narrower. So if the new building is getting $2000 a month and ours used to get $1400 a month, then post-capital investment we get $1800 a month. And what we’re looking at is we call it, return on equity of the spend. So if we believe that we can get 15 to 20% unlevered return on incremental equity, we’re interested in the deal. When we buy any deal we’re using debt and equity. In value-add deals you’re really looking at putting anywhere from 60 to 75% leverage on the deal, whereas in core it’s more like 40, 45, core plus it’s probably 45 to 60s. So one of the big differences is in value-add you’re taking more debt to equity risk. If you’re thinking about expected returns, value-add deals should be receiving anywhere from 11 to 15% annualized returns. So as an investor, either in a value-add property, if you’re doing it direct, or a value-add fund if you’re evaluating a manager, you really should be thinking first, how much risk do I wanna take? And that’s so important. If you’re in the stock market, a value-add deal is analogous to a gross stock. So if you’re looking at the stock market and thinking you know, I really wanna be in the NASDAQ you know, these are all gross stocks. When you buy Amazon, or Apple, or Facebook, you’re looking for growth. Value-add is the way to take growth risk in real estate but it absolutely isn’t development ’cause I’ll cover that next which is in opportunistic investment. (bright upbeat music)