The Power of Active Appreciation

In other blog posts,  I’ve talked about ways real estate makes money, including cash flow, tax savings, and passive appreciation.

Now onto my favorite…

Active Appreciation - increasing a property’s income and value with improvements and expansions

Starting out it was all about renovations. I bought houses in rough shape so I could get a deal on the purchase price and then bring in more rent by fixing them up myself.

It worked, but it took up all of my time. Literally…no days off.

My first single-family home took over 2,500 hours of renovating and managing. It ended up bringing in $850 a month and added around $25K in equity over ten years.

After years of buying, renovating, and renting, I was exhausted and ready to scale without working non-stop. That’s when I started thinking bigger. 

Some of the last residential properties I bought were two 15-unit apartment buildings. And with around 300 hours of work, they were bringing in over $20K a month, and I added over $1M in equity.

I also moved into commercial real estate, which completely changed the way I look at increasing ROI.

With CRE, active appreciation is not just painting walls and replacing floors. It can also be about improving operations, adding income streams, or building expansions.

First, it was self-storage. Next, I got into hotels. And one reason I love them both…so many ways to increase value and income.

With self-storage, you can add income streams with things like selling locks, boxes, and moving supplies, renting mailboxes, putting in vending machines, or offering insurance.

With hotels and resorts, you can get creative with food and beverage, affiliate excursions and tours, events, gift shops, spas, and so much more.

Also with hotels and self-storage, if you buy a property with extra land you can expand by adding more units. That’s when things get really exciting.

All of this is so important, not only for cash flow reasons, but because when the annual income of the business goes up the value of the property does too.

One of my favorite projects was Mariposa Beach Resort in Belize. We tightened operations, cut unnecessary costs, expanded the food and beverage program, and added six more bungalow treehouses that will bring in around $700K a year. 

So when you’re analyzing a deal, don’t just look at what’s there. Look at what it could be with the right plan.

My strategy used to be putting in the hours. Now, it’s having the right strategy for the right property.

To maximize your ROI in a way that really moves the needle, you don’t have to spend a decade in the single-family grind like I did.

Commercial real estate paired with an informed active appreciation strategy is a great way to collapse the wealth timeline.

Step one…Think Bigger, Sooner.