4 Reasons to Consider Stabilized Assets over Value-Add

“Value-add” is all the rage, especially among newbie investors who just learned the term at their first real estate seminar.

Stabilized assets seem to be the red-headed stepchild of the real estate world … which is strange, considering that they have sat at the core of some of the most respected investment portfolios in the world. In fact, “core asset” is another term for high-end, stabilized real estate.

So why the obsession with “value-add?” Dollar signs in the eyes. Yes, value-add real estate can produce higher yields. Who wouldn’t want to double their money in five years?

So we have a classic red ocean — a feeding frenzy of investors at various skill levels, fighting over assets in that value-add sweet spot.

We come with a message from calmer waters — there’s a reason stabilized assets have been perennially popular. If you have been frustrated by the search for the perfect value-add opportunity, maybe the humble core asset is worth a second look.

First, a brief reminder of the difference between stabilized assets vs. “value-add” plays:

Stabilized Assets

  • Over 90% occupancy
  • Close to market rents
  • Little deferred maintenance or need for major improvements

Value-Add Assets

  • Less than 90% occupancy
  • Below-market rents
  • Significant deferred maintenance and need for improvements

Got it? Then let’s look at four reasons to consider stabilized assets over value-add assets.

1. Less Risk

Yes, value-added plays carry greater potential yields … but that potential comes with greater risk. The chance you could lose everything is very real, more real than most deal sponsors want to let on.

If construction and renovations run over, you overestimate your potential for revenue increase, fail to refinance, or if any number of things go wrong, those big yields could turn into total losses.

With stabilized real estate, by contrast, there’s much less that can go wrong. It’s already performing well and eligible for top financing, which gives you a lot more room to absorb the unexpected. It’s stable, so there’s less risk.

2. Cash Flow on Day One

Because of its higher occupancy and market rents, a stabilized property usually produces cash flow dividends right away. Furthermore, with less deferred maintenance you have a reduced risk that a system failure will create a cash flow crisis.

3. Greater Liquidity

Shares of stabilized real estate enjoy greater liquidity, with more demand on the secondary market. If you need to liquidate your position on short notice, you are much more likely to find a buyer for a stabilized position than a value-add position.

4. Potential for Upside

Finally, for all the hoopla about the greater yield potential of value-add real estate, stabilized assets usually also have some upside potential. You may be able to increase the property value by reducing expenses and a stabilized property will benefit from momentum in the market just as much as — if not more than — value-add real estate.


Despite the popularity of value-add assets in the real estate marketplace, it sometimes pays to go against the grain.

Not only will you find less competition for stabilized assets — but also you might even fall in love with the reduced risk, immediate cash flows, and even upside potential that other investors have missed.

SecondRE - Liquidity for Real Estate

We’re SecondRE

SecondRE partners with sponsors to enable liquidity for their investors.

SecondRE Marketplace enables investors to buy and sell holdings in residential and commercial real estate properties, with the sponsors’ blessing.

By enabling liquidity, sponsors find it easier to attract new investors.

SecondRE Inc. is an American company led by seasoned technology and real-estate entrepreneurs, who have scaled operations all the way to NASDAQ

Related Posts

Real Estate Investment Basics: What is a Sale-Leaseback?

Investors looking to expand their real estate portfolio should consider sale-leaseback transactions, a valuable tool for both buyers and sellers in the commercial real estate market. By selling the property and leasing it back, sellers can free up capital while still retaining the use of the property, and buyers can acquire an income stream with the potential for long-term appreciation. To ensure that the deal is structured in a mutually beneficial way, it’s essential to carefully evaluate the terms of any sale-leaseback transaction and work with experienced professionals. Read our blog to learn more!

Read More

5 Insights to Uncover the Hidden Gems of the Industrial Real Estate Market

Industrial real estate properties are a popular investment choice for those looking to diversify their portfolios and generate steady income streams. From location to market demand: learn the key factors driving industrial real estate investments and the right time to invest. From understanding the impact of e-commerce on the industrial market to the importance of demographic analysis, this blog covers everything you need to know to drive your investment strategy.

Read More

Investing in Real Estate through your IRA

Investing in real estate through an Individual Retirement Account (IRA) can be a smart way to diversify your retirement portfolio and potentially generate higher returns. In this comprehensive blog, we delve into the advantages of investing in real estate through an IRA, including tax benefits and the potential for higher returns. We also explore the types of IRA accounts suitable for real estate investment, including Traditional IRAs and Self-Directed IRAs.
From choosing the right IRA account to finding a suitable real estate investment, and understanding the rules and regulations surrounding real estate investments in IRAs, this blog covers everything you need to know to make an informed investment decision. Whether you are a seasoned real estate investor or just starting out, you want to read this.

Read More

Real Estate Investment Basics: What is a Ground Lease?

Discover the advantages and challenges of investing in ground leases, and how they can be a profitable investment strategy for both landlords and tenants. The blog covers key concepts such as what a ground lease is, how it works, and the advantages and challenges of investing in ground leases for both landlords and tenants. It also discusses the differences between ground leases and traditional real estate ownership, and offers insights into the potential risks and returns associated with ground lease investing. We also cover potential tax incentives and financial benefits that ground leases can offer investors.

Read More

The Accredited Investor’s Recession Survival Guide

The fluctuating stock market that frequently follows a recession poses great difficulty for many investors. Therefore, knowing how to manage the market on the road before and during a recession is a necessary skill. In most cases, the entire real estate market changes when a recession approaches. Learn more in our new blog!

Read More

Real Estate Investments Basics: Capital Stack

Investors who are interested in assessing the risk and predicted returns for a real estate investment should understand the concept of a Capital Stack. Your investment can be designed to mitigate excessive risk or structured for sufficient potential profits by utilizing this model to evaluate tradeoffs. It is one of the most important ways to assess a prospective investment in a commercial property. Learn more in our new blog!

Read More

Why miss out on great Real Estate investment opportunities?

Signing up to SecondRE is FREE and we keep your details confidential.

Once you sign up, you’d get full access to all available opportunities on the Marketplace.