Why Some Value-Add Deals Underperform

Question

One thing I’ve learned after nearly 20 years in commercial real estate:

Most value isn’t lost during underwriting.

It’s lost after closing.

Delayed vendor transitions.
No clear operating procedures.
Deferred maintenance without a plan.
Inconsistent communication.
Teams constantly reacting instead of executing.

I’ve seen well-underwritten assets underperform because operations weren’t aligned from day one.

In my experience, disciplined execution after closing is often what separates a good investment from a great one.

What operational challenge caught you most off guard after acquiring a property?

Brandon Vukelich · Answer

1. Getting hit with crazy bills for snow plowing, some years are far more excessive than others. I believe the previous owner did it themselves or hired someone off the books as there was nothing in previous P&Ls about snow plowing and it wasn't hidden under landscaping or some other line item.

2. More issues with large trees that weren't anticipated.

3. The rate at which asphalt parking lots deteriorate and the frequency that they would need to be resealed/coated.

This stuff varies by geography so entering a new market opens your eyes to different circumstances.

G. Brian Davis · Answer

Good point. Buying the property is only the beginning. A lot happens after closing, and that's where a good operator really stands out. That's one of the biggest things I look at before I invest.

Giuseppe Cavucci · Answer

Deferred maintenance without a plan is the one that gets me every time I hear these stories. It's rarely that people don't know the roof or HVAC will eventually need replacing, it's that nobody assigned a number and a timeline to it, so it just sits as a vague future problem until it's suddenly not.

What caught me off guard early on wasn't even a big system failure, it was realizing how many small deferred items compound into one large unplanned hit. Gutters not cleaned, minor roof repairs pushed back a season, a water heater nursed along past when it should've been swapped. None of it looks urgent in isolation, but it all lands in the same 18 month window and suddenly you're writing five checks at once instead of budgeting for them separately over years.

Curious what you've seen work best for keeping teams disciplined on execution post-close, is it more about the operating procedures themselves or having someone specifically own the capex calendar?

Andrea Fernandes · Answer

The "who owns it" question usually matters less than whether the item actually resurfaces on its own. A capex calendar sitting in a spreadsheet still depends on someone remembering to check it. The setups that actually hold up have the deferred item pinging someone on a schedule, not waiting to be noticed. Ownership without a nudge just delays the same problem.

Have you seen procedures alone ever hold up without something forcing the check-in?

Eduardo Cavasotti · Answer

Rarely. A procedure holds up when the trigger, evidence, and consequence live in the same place.

If the roof is 18 years old, the next action needs a date, a reserve target, and the exact proof someone must attach when it gets checked.

Otherwise the procedure is a post mortem document.

Andrea Fernandes · Answer

@Eduardo Cavasotti right, and that's the real test: if the roof age and HVAC age live in a memo instead of resurfacing on their own dates, it's not tracked, it's just written down somewhere. That gap between documented and tracked is where most deferred maintenance actually slips.

Patrick O'Sullivan · Answer

I think another thing that gets overlooked is tenant communication during the transition. Even if you have a solid operations plan, tenants can get frustrated if they don't know who to contact, how to pay rent, or when maintenance requests will be handled. A smooth handoff helps build trust early and can save a lot of unnecessary headaches for the new owner.

Jim Johnson · Answer

I'd put communication and process alignment at the top of the list. Even with a solid acquisition plan, things can slip quickly if owners, property managers, vendors, and residents aren't working from the same expectations.

The properties that seem to stabilize the fastest usually have clear operating procedures in place from day one. That consistency helps the team spend less time reacting and more time executing the business plan.

Eduardo Cavasotti · Answer

Elle, the part I see missed is that the post close plan needs to be tied to actual property records, not kept as a separate operating memo. If the roof age, HVAC age, deferred repairs, vendor bids, and reserve target do not resurface on dates, they are not a plan, they are notes. Closing is when the deal moves from underwriting to exception management.

Elle Dominguez · Answer

@G. Brian Davis Well said. Closing is really where the business plan begins. Strong operations, disciplined execution, and proactive asset management are often what determine whether an investment actually achieves its projected returns.

Why Some Value-Add Deals Underperform

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