Stabilization is A Process, Not An Endpoint


That’s what our partners at Voyage Holdings celebrated with us in January for our MHP.

 It was a great moment to enjoy all the hard work of the past year. 

But what does “achieving stabilization” really mean? 

Stabilization is a Process, not an Endpoint

When first looking at a property, a lot of the business cases are centered around what will happen after it is “stabilized”.  

What the asset managers and general partners are really looking at is property performance after the first stage (Stage 1) in the business plan is complete.

Stage 1 for a B/C class property acquisition (the ones Clover focuses on) is almost always a big-shift value-add. Think renovations, exterior updating/design, adding new property features, and more – all to allow a quick increase in rental income and resident expectations.

For the MHP, stabilization was initially defined as all lots having resident owned homes at market lot rents. 

Detailed work included:

    • Increasing current resident rent to market
    • Infrastructure maintenance
    • Clearing and prepping unused lots for hookups
    • Acquiring homes to place on vacant lots
    • Getting those homes through inspections
    • Selling those homes to new residents

All that in year!  That’s a lot of change in a short period of time.  We completed the initial business plan.  But that doesn’t mean we’re done…

Enter Stage 2 – Additional value add and operations

Now that we finished the initial business plan successfully, spotify music promotion we are looking at other ways to increase the property value. For instance:

    • Discuss with the city to let us have more lots since we have additional land (now that we did a good job on the others)
    • At what rate can we continue increasing lot rents to keep pace with the local growing economy?
    • Are there nearby potential acquisitions that would reduce operations costs or increase the land value?
    • What other amenities could we offer residents to drive up their happiness enough to pay more than average rent?
    • Are there other financing options that would better position the property financial performance?

There are many more questions like this which can (and should!) be asked by an asset management/ownership team after the initial stabilization is complete.   

After Stage 2 is complete?  Repeat Stage 2. 

And keep repeating until the best financial decision to make is a sale.  Sometimes in this cycle the Stage 2 business plan value-add will be small (3% rent increase), CoinPal and sometimes it will be big (need to upgrade to new fixtures to keep up with competition). 

The point is to not get complacent and think “this property is performing the best it ever will”.  Once you start thinking that, it’s probably time to sell to someone who sees opportunity where you see stagnation.  

Stabilization is a process where you are constantly reassessing and adjusting property operations to achieve the best and highest use in the ever-changing local/macro environment.  Aka – investment optimization!


Want to use real estate to build your own luck, but need more time/money/education?

No problem! 

Clover can help.  

You can start making an impact  sooner than you think.

Join Club Clover and start building your own luck today!


Step 3: Communicate and Operate

Based on the team’s answers to the questions from Step 2, we now dig into the nitty-gritty of asset and property management.  

If you hire a great property manager (PM), this section will be easy because they already have the knowledge and robust processes for it all.


If you instead have a good PM, an ok one, or are self-managing then you’ll need to check and/or develop the processes and measurement systems to keep the property (and your business) on track.


This boils down to one question:

How will the team communicate?


The more time you spend on how, where and what will be communicated by who up front the smoother the whole business plan will run.

What communication platform works best for your team?  

For us, we use a combination of Asana, regular meetings, email and (for time sensitive issues only) text messages.  This way we drive as much as possible communication in written form.  This helps avoid confusion and can be referred back to over and over.

The Asana platform also automates a number of great things like:

    • Recurring maintenance task reminders
    • Recurring CAPEX reminders (inspections needed for roof, HVACs, water heaters, sewer pipes, etc)
    • Recurring asset/property management task reminders (taxes, insurance, filings, 1099s, K-1s, etc)
    • Alignment between vacancies, turn work and up coming move-ins
    • Documents/photos embedded right in the tasks
    • Email reminders to the people for that task when the due date is coming up
    • You can even get fancy and use workflows, templates, goal trackers etc all in one place.
[We have no affiliation with Asana, we just like it a lot]

Other teams use Notion, Google Tasks, spreadsheets or really anything that works consistently where communication can be as centralized and standardized as possible.    The point here is to DECIDE on something and get your team on board with it.  

Don’t take this part for granted.  It makes keeping everyone rowing in the same direction much easier.


Once you have a platform, now you (preferably with your PM) has to fill out all the process and decisions that can be made ahead of time.

This way, the team can act more independently (no one wants to be micromanaged).  Even better, if someone has a question, they can write it down in the platform.  Then everyone sees it, you can update the standard process, and now it doesn’t come up again!

Here are a few ideas for standard processes to develop up front – even if you change them later after operating for a while:

  • How “Market Rent” is calculated
  • How often to calculate key metrics (also called key process indicators or KPIs), and what those are
  • What items are covered by Property Maintenance (very specifically) and what items are considered tenant responsibility
  • How will emergency situations be handled, and what phone numbers are to be called?
  • How to do a property inspection (checklist of items, what to take photos of, where to store the report, how to report issues so they get to maintenance, etc)
  • Script/QA resource for people speaking with tenants/potential tenants so all the answers are the same (or refer to the right person)
  • Which items are categorized CAPEX and which OPEX (yes, this is done wrong all the time by PMs who just don’t pay attention to it)

Hopefully, you’re beginning to see why setting up the right communication platform and process at the beginning is so important.  

Having a plan and the milestones to get there are necessary first steps, but the work to do it comes down to communication and standard processes.  The better you do those, the closer you come to your plan with less stress from the whole team.


How well is the team sticking to the processes?

How will you know this?

Measuring is very helpful, IF the right things are measured. 

Successful business plans and operations plans include key metrics, otherwise known as Key Process Indicators or KPIs.  These give insight into how well the team is working together and progressing towards the business plan goals.

If you can integrate these measurements into your processes, that’s ideal.

For example, lease-up time depends heavily on marketing and traffic.  Measuring how many people are seeing the listing, doing shows and ultimately converting gives you an idea of how effective the lease-up process and team are.  This can be done automatically with digital tools (Rently and both offer data), but also needs to be recorded by on-site PMs (how many people just dropped in, how many phone calls were taken and resulted in an application, etc).  Coming up with a few metrics that encompass all that data is really helpful.  In this example, we use conversion rate to help us see how many people have to be interested for a unit to ultimately rent.



Finally, have a team review.  

Go over the strategy, processes and communication initially and often.   It doesn’t have to be every aspect, every time.  However a stale process almost certainly isn’t helping the team perform at its best. 


You joined with this team because they are smart and capable.  Let them influence the processes and listen to them.  Your business will be better for it and your investors will thank you.

Now you know the process for success – 


Let’s get to work building our own luck!

Enjoy being part of the team but don’t have the time?

No problem! 

Let’s talk about how you can make an impact – both in your life and the lives of others.



Lower Your Taxes with RE Investing

Who likes paying taxes?


Don’t everyone raise your hands at once.


The reality is taxes are a part of living in a society – they help pay for our schools, roads, libraries, parks and much more.

What if you could choose where your tax dollars went to?

That’s why at Clover we want to help you understand how to keep more of your taxes in your hands.  Then you get control over what aspect of the community you invest in, and which ones are using the money the best.

Sounds good... how does real estate help me pay less taxes?

Real estate investing is considered a passive activity by the IRS.

All passive income is grouped together to determine overall income for the year.

That means if you have capital gains from any passive activity, you can use losses from any other passive activity to offset that.


Quick example:

  • Sell one property (or other passive investment) held for longer than a year in 2022 with $10k in profit.  Typically you’ll pay capital gains tax of 15% on that $10k, leaving you with $8500 in profit to reinvest.
  • BUT if you also invest in another property in 2022 that gives you $10k in losses, now you have $0 in income for the year.
  • Now you have been able to use the whole $10k into a new investment instead of paying 15% to the IRS.

Neat right? 


Wait...why do I get a tax loss for buying real estate?

Ah, good question.

Real estate is considered a depreciating asset – it loses value over time.

So each year you own it, you get a loss on your taxes since the asset isn’t as valuable.  Even if it’s in perfect working order and making a ton of money.

You can increase your income and decrease your taxes at the same time!


When you buy real estate, that first year you can *currently* choose to accelerate depreciation.  Which means you get up to 100% that depreciation in year 1 of owning the property!!!

Now, this is changing starting 2023.  It will decrease by 20% per year until we’re back to the historically normal depreciation schedule.


Oh wow, so for the most tax benefits investing sooner is better?



Check with your certified public accountant (CPA) and see how much passive investing can benefit your situation.  We are not accountants and all information herein is for education only.


You don’t have to buy real estate on your own!  All of these benefits are available as a part of a buying group (syndication).  


We regularly have deals that can help you reinvest all your money instead of part of it.


That helps you grow your wealth faster so you can choose how best to help your community.

Love the impact and tax benefits but not sure what the next steps are?

No problem! 

Send a note or set up a meet – we’d love to help get you closer to your goals.



Step 2: Identify the Milestones

This part I really enjoy.

A business plan is just the path from today to the goal you identified from this post.


Once you know your destination, you can start filling in the big steps and milestones along the way.


Keep in mind – the only thing guaranteed is change. This will not be perfect!


At this point we’re not getting very detailed, but a clear path from today to your goals laid out for the different aspects of the project keeps your team all rowing in the same direction.


Questions we answer with the team at this stage:

What maintenance/upgrades are required (either for safety, habitability or insurance)?

Which of the pieces in our goal are the biggest levers to achieving returns?

What level of operational changes are needed?

What level of interior finish best supports our end goal?

How much up-front capital do we have to work with?

What timeline are we on to achieve the target market rents?

Once you have these pieces agreed to with your team, you can see much farther ahead to where you want to end up, like viewing the rest of the trail from the top of a mountain.

Next we’ll cover how to enact your plan with your team so that it is both robust AND flexible to big picture (macro) changes.

Love being part of the transformations but not the time and process?

No problem! 

Let’s talk about how you can make an impact – both in your life and the lives of others.



Step 1: Defining A Property’s Goals

How do you create a business plan before you’ve even under contract?

First – a business plan is a living thing.  It changes constantly, especially in the early stages of evaluation.




Without it, you’re going on a journey with no destination or idea of what supplies you need.  


Could you make it to an amazing place? 



Is it more likely you’ll end up lost, hungry, covered with insect bites and wishing you’d packed sunscreen?

Also Yes.


Most multifamily properties fall into one of these categories:

  • Fully Stabilized – This is what all other categories have business plans to achieve.  These typically >90% occupied for the past 3 months at market rates, are being used to their highest potential and have no significant issues.
  • Light Value Add – Small improvements (think lighting, paint, cabinet hardware, minor exterior improvements, etc) changes only needed to bring property up to market rates and be Fully Stabilized.
  • Heavy Value Add – Lots of issues and investment needed (think plumbing, electrical, mold remediation, structural fixes, significant upgrades, etc) to get to Fully Stabilized. However that investment is still worth it because the best use of the building/land is to get it back to former glory.
  • Redevelopment Opportunity – Property is not being used to its full investment potential.  For example, a single family home in the middle of a fast-growing market could offer much higher returns if it was torn down and a commercial building took its place.  This takes the most investment and risk, but also can provide very good returns.


Spotting which one of these you (1) are interested in and (2) have the network/resources to pull off is the first key piece of developing a good business plan on a particular property.  


The good news is that if you don’t have (2) yet, there’s a ton of free resources, groups, and mentors out there to help you get to what you are interested in.  I’m happy to help!


Or if (1) doesn’t sound so fun, let’s talk through how you can make an impact – both in your life and the lives of others. 

What Do These Real Estate Terms Mean?

Every industry has its favorite terms, acronyms and idiosyncrasies and real estate is no different.

This page provides a quick reference for many of them.

Let us know if there’s one you’d like to add or needs more detail!

An accredited investor is a person who qualifies to invest in real estate syndication by satisfying the financial or professional criteria laid out by the Securities and Exchange Commission (SEC).  These people can participate in publicly advertised real estate investments.

The 2022 financial requirements to qualify are: 

EITHER: An annual income of $200,000, or $300,000 for joint income with a spouse, for the last two years with the expectation of earning the same or higher in the future

OR: A net worth exceeding $1 million, either individually or jointly with a spouse (not including the equity in a primary residence).

For professional requirements refer to: SEC

If you do not qualify as an accredited investor, don’t be discouraged!  Take a look at the sophisticated investor definition and give Clover Capital a call.

The fee paid by the new buying partnership at closing to the general partner for sourcing, funding, evaluating, financing, and closing the investment. Fees typically range from 1 to 5% of the purchase price, depending on the size of the deal.  The larger the deal, the smaller the fee generally.

See Ordinary Income definition.

The amount an asset’s value increases over time. The two main types of appreciation that are relevant to group purchased properties are natural appreciation and forced appreciation.

Natural appreciation occurs when the market cap rate naturally decreases over time.  The management team can impact this through picking a solid market to purchase in and proper exit risk planning. 

Forced appreciation occurs when the net operating income (NOI) is increased by either increasing the revenue or decreasing the expenses. The management team can impact this through property improvements and efficient operations management. 

Implementing the business plan for one or more investment assets. This includes working to increase asset value over time while minimizing risk to the owners and investors.

A fee paid to the asset manager for oversight to ensure the business plan is implemented correctly by the operations team. Generally, the fee is 1 to 5% of the gross income per month, depending in part on the asset’s size.  This is separate from the property management fee.

How much uncollected money is owed by a tenant after move-out.

A statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.

A tax incentive that allows a business to deduct a large percentage of the purchase price of eligible assets in the first year of ownership, rather than write them off over the “useful life” of the asset.  Helpful in reducing the tax bracket for the current year for some investors.

However, if the asset is sold before the end of the useful life it may be subject to deprecation recapture.  Therefore not all investors choose to take advantage of the full bonus depreciation available on their K-1 tax forms for the property.


The occupancy rate required to cover all the expenses on a property, including debt service.

A rise in the value of a capital asset that gives it a higher value than the purchase price and is not realized until the asset is sold. A capital gain may be short-term (one year or less) or long-term (more than one year) and must be claimed on income tax returns. Short-term capital gains are taxed at ordinary income tax rates, while long-term capital gains are taxed separately.

Capital expenditures, or CapEx, are the funds used by a company to acquire, upgrade, and maintain a property. An expense is considered CapEx when it improves the useful life of a property and is capitalized – spreading the cost of the expenditure over the useful life of the asset. CapEx is part of a property’s non-operating expenses. As such, it does not reduce a property’s net operating income or overall value. CapEx includes both interior and exterior upgrades and items such as replacing a parking lot or landscaping renovations.

The rate of return based on the income that the property is expected to generate. The cap rate is calculated by dividing the net operating income by the current market value of a property.

A longer explanation of how this is calculated and used is in this post.

A share of profits that the general partners receive as compensation, regardless of whether they contribute any initial funds. Carried interest acts as a of performance fee, it motivates the general partners to achieve a performing property. When used in a preferred return structure, carried interest is only paid from funds available after all other investors are compensated.

Cash available in a given period of time (cash in minus cash out)

Free cash flow represents liquidity available to pay distributions or invest back into an asset.

The process of identifying property components that are considered “personal property” or “land improvements” under the federal tax code for tax reporting purposes. Have a cost segregation study done on a property accelerates the depreciation schedule to support bonus depreciation.

A way to measure if the cash flow is high enough to pay the debts.

DSCR=NOI/Debt Coverage.

DSCR =1.0 means that there is just enough money to make debt payments. Typically 1.25 is the target ratio so there is a relatively low risk the property won’t be able to pay its debt as the market fluctuates. 

Depreciation is a taxable expense that recognizes that fixed investments, like roofs or machinery, degrade over time and their value therefore goes down.

Depreciation is considered an expense per current tax law, therefore reducing the overall property income and tax payments.

Also see Bonus Depreciation definition.

The limited partner’s portion of the free cash flow based on preferred return and percent ownership.  Typically provided via wire or check on a monthly or quarterly basis.

Aka, mailbox money.

Process of confirming that a property is correctly represented by the seller prior to purchasing.

Typically includes:

  • Financials Review
  • Environmental Review
  • Property Walk Through
  • Operations Process Review
  • Survey
  • And so much more!

Performed by the buyer to confirm their underwriting.

Positive cash flow. Aka total income or total revenue.

EGI =Gross Potential Income minus vacancy loss, loss to lease, concessions, and bad debt. 

The rate of return based on the total net profit and the equity investment.

EM = (Total net profit (cash flow plus sales proceeds) + investment) / investment

An EM of 1.0 means the investor gets their initial investment back with no profit.  An equity multiple of 1.9 means the investor gets their initial investment back plus a 90% profit.

When a person’s passive income or cash flow from non-work sources is equal to their total expenses and is expected to continue at that level.

At this point, the person does not “need” employment (i.e., W-2 or 1099 job, or self-employment) income to support their lifestyle. Work becomes a choice, not a necessity.

An owner of a partnership who has unlimited liability.

A general partner is usually a managing partner and is active in the day-to-day operations of the business.

In crowd funded properties or a syndication, the GP is also referred to as the sponsor or syndicator and is responsible for managing the entire project. It can refer collectively to the sponsorship/management team or to each sponsor/manager individually.

The amount of revenue an apartment community could produce if it was 100% leased year-round at market rental rates plus any additional income sources from the property.

Someone or an entity who promises to pay a borrower’s debt in the event that the borrower defaults on the loan obligation.

General Partners typically act as loan guarantors. Additional guarantors who are not sponsors/managers can be used to qualify for a loan.  

Note: A guarantor is different from Key Principle.  See Key Principle definition.

How long a management team plans to keep a property prior to selling it.

Rate needed so that the sum of all future cash flow is equal the investment.

Let’s say you invest $10000. The investment has cash flow of $1000 in year 1 and $4000 in year 2. At the end of year 2, the investment is liquidated and the $10000 is returned.

The total profit is $5000 ($1000 year 1 + $4000 year 2). Simple division would say the return is 50% ($5000/$10000). But since the time value of money (two years in this example) impacts return, the IRR is actually only 23.43%.

If we had received the $5000 cash flow and $10000 investment returned all in year 1, the IRR would indeed be 50%. But because we had to “spread” the cash flow over two years, the return percentage is negatively impacted. The timing of when cash flow is received has a significant and direct impact on the calculated return. The sooner you receive the cash, the higher the IRR will be.

When someone offers a high IRR, make sure to understand the hold period they are using to calculate that – and then ask if that is realistic. 

A team consisting solely of partners who share unlimited liability (general partners).

Requires significantly more personal capital from each partner, but also splits the profits in fewer ways.

Person(s) who control and/or manage the asset, are critical to the successful operation of the asset, and who may be required to guarantee the loan (aka, sponsor or manager). 

A non-binding agreement created by a buyer with their proposed purchase terms; commonly submitted as an initial purchase offer.

The amount of debt used to finance assets.

A tax-deferred transaction that allows for the sale of an asset and the purchase of another similar asset without generating a capital gains tax liability.

Governed by Section 1031 of the Internal Revenue Code (IRC), these are commonly referred to as 1031 exchanges.

Can be either a “forward” exchange when a new property is not yet bought or a “reverse” exchange when a new property is already bought.  Both are complicated and require discussion with a 1031 exchange specialist prior to performing. 

Someone who invests in an asset but their liability is limited to the extent of their share of ownership as they have no active control over the operations.

In crowd funding or a syndication, the passive investors who fund a portion of the equity investment are LPs.

The ratio of total project costs (loan amount plus capital expenditure costs) divided by the asset’s appraised value.

A loan using a loan-to-cost ratio, as opposed to loan-to-value ratio, typically means the ability to include planned CapEx funds in the loan amount.

The ratio of the loan amount divided by the asset’s appraised value.

Revenue lost based on the difference between the market rent and the actual rent.

Often at sale is presented as an opportunity to the buyer for additional income.

The rent a unit might reasonably expect to receive from a tenant , based on the rent charged at similar properties.

The market rent is typically calculated by conducting a rent comparable analysis.

The property’s total income minus the operating expenses, including debt service.

NOI represents the asset’s profitability (vs free cash flow which represents liquidity)

Expense that is unrelated to its core operations. The most common types of non-operating expenses are interest charges and capital expenditures.

Portion of income that is derived from activities not related to its core business operations.

For example, interest from banking accounts.

A type of loan secured by collateral only. If the borrower defaults, the issuer can seize the collateral but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount.

In general, the borrower does not have personal liability for the loan.

Number of occupied units.

Physical occupancy is the number of units with people living in them divided by the total number of units.

Economic occupancy is the number of units people are actively paying to live in divided by the total number of units. 

A document that outlines the responsibilities and ownership percentages for the partners in the limited liability corporation (LLC).

The costs of running and maintaining a business and/or asset.

Any type of income earned by an organization or individual that is taxable at ordinary rates. It includes but is not limited to wages, salaries, tips, bonuses, rents, royalties, and interest income from bonds and commissions.

Earnings from a rental property, limited partnership, or other enterprises in which a person is not actively involved.

As with ordinary income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS).

The return that limited partners are given prior to the general partners receiving payment.

This is commonly referred to as the “pref.”

A clause in a mortgage contract stating that a penalty will be assessed if the mortgage is paid down or paid off within a certain period.

A document that outlines the terms of the investment and the primary risk factors involved with making the investment.

The PPM typically has four main sections: the introductions (a brief summary of the offering), basic disclosures (general partner information, asset description, and risk factors), the legal agreement, and the subscription agreement.

The ideal projections of the revenue, expenses, and returns for operating a property if everything goes according to the business plan.

A document or spreadsheet containing detailed information about a business’s revenue and expenses.

When it includes the monthly information over the last X months, it is referred to as a trailing X-month P & L, or a T-X.  (T-12 for example is the last 12 months of profit and loss on a business).

A REIT is a company that owns, operates, or finances income-generating real estate.

Modeled after mutual funds, REITs pool the capital of numerous investors.

This makes it possible for individual investors to earn dividends from real estate investments – without having to buy, manage, or finance any properties themselves.

A fee paid to the general partners for the work required to refinance an apartment.

The increase in rent after performing renovations to the interior and/or exterior of an apartment community.

A list with detailed information on each of the units in a commercial property.

For an apartment community, it may include the unit numbers, unit type, square footage, tenant name, market rent, actual rent, other recurring amounts due, deposit amount, move-in date, lease-start, and lease-end dates, and the tenant balance.

Measures the amount of return on a particular investment relative to its cost.

ROI =  investment’s return / cost of the investment

Aka total return

A security is a financial instrument that holds some type of monetary value.

Securities can be broadly categorized as either equities or debt.

An investment in a real estate syndication is an equity security guided by the regulations—in the United States—of the Securities and Exchange Commission (SEC), as well as applicable state agencies. This is why the SEC is involved in crowd funded properties where some investors are not active and liable partners.

An equity security represents ownership interest and entitles the holder to some control of the company on a pro-rata basis via voting rights.

A person who does not qualify as accredited, but is deemed to have sufficient investing experience and knowledge to be able to weigh the risks and merits of an investment opportunity.

Typically can only invest in private real estate offerings with a managing team they have known before the offer was available.  

If you are a sophisticated investor, please reach out so we can get that relationship documented before the next deal is available.

See Accredited Investor definition.

See General Partner.

A contract between the LLC purchasing a property and the limited partner purchasing shares in that property to pay a specific price.

A partnership which allows investors to pool their resources and share risks and returns. 

The SEC defines two classes of investors in a syndication. 

  1. The management team is active and labeled “General Partners” since they take on the general liability.
  2. The investors are passive and labeled as “Limited Partners” since they have limited liability.

These two groups form a partnership called a syndication, where the investors can invest in real estate deals targeting good returns while knowing their risk is capped and that they don’t have to do anything active once the property is purchased. 

The management team earns more for all their time and effort, and also takes on the risk that if things go badly, they have to cover that from their own pocket.

See General Partner.

See Return on Investment (ROI).

The proportion of unoccupied units.

Also the opposite of Occupancy Rate above.

A stabilized apartment community where the NOI can be increased significantly through a change in business plan.

Typical business plan changes for value-add include:

  • Physical improvements (CAPEX)
  • Raising income
  • Decreasing operating expenses
  • Increasing occupancy
  • Decreasing turnovers

Finding the “Just right” Renovation Plan

Renovation projects on income producing properties are a bit tricky.  Smaller operators tend to either over- or under- finish, and this leads to challenges getting that target return on investment (ROI).  


Below are the steps we use to figure out the best game plan on a specific properties, with examples from our own portfolio.

  1. Research. Research. Research.

Each property is in a different market, unless they are literally right next to each other.  Even then differences are possible.  Knowing that local market and how it is being impacted by growth patterns, local development plans and business investments is the most important thing in developing your renovation plan.  Ask yourself:

  • What are my exit strategies?  If you’re buying to hold or have a multifamily building then the finishes are different than someone planning to sell a SFH in a few years to an owner-occupier and are using the rents to ride out the market volatility. Know who you are and will be compared to at exit.


  • What does my competition currently look like?  Do they have granite, washer/dryer connections, dishwashers, microwaves, and modern finishes? Or are they leasing up with threadbare carpets, poorly patched drywall, doors that don’t properly latch, and minimal used appliances?  Knowing this will allow you to position your property for minimum updating while attracting the best of the tenant base looking in that market.  You can find this out by checking websites and photos of properties for sale, but even better is to do some mystery shopping.  Drive around (or hire someone to) and gather photos and data on your own.  Marketing does not always match real life.

2. Decide on the target market

A renovation is not done on a whim.  For some reason, this unit isn’t performing to the business plan and needs some kind of change.  Assuming from the research in step (1) you found some differences between this property and the competition, now we need to decide what the goal of the renovation is.  Ask yourself:

  • What is the target tenant profile?  Do you want to position the property with lower than average rent to fill vacancies quickly and keep occupancy high or higher than average rent to attract higher income earners? Do you expect high turnover in the market or is the tenant base sticky? While it is great if you can attract multiple types, picking one tenant profile that best fits the business case helps to guide the property design.
  • What rent level matches your target tenant profile relative to the competition?  Is the larger market generally growing so pushing rents could work or is it stagnant/shrinking so that staying at or below average would get the unit filled faster?

3. Decide on a target finish level

Based on the information from (1) and (2), you can match the chosen rent and tenant profile with what other local properties are offering.  That gives you a starting point for developing your own target finish level.  After you have this starting point, ask yourself:

  • Do I need to do all of these changes?  If not what are the changes that will yield most of the return with the lease investment?  If you’ve heard of the 80/20 rule, it applies here as well.  Sometimes a simple face lift is enough to get to the target rent levels.
  • How long do I plan to hold the property for? If you’re doing a quick 1-5yr hold, putting in very robust finishes to minimize ongoing maintenance may not provide a strong ROI.  That’s not to say buy the cheapest possible finishes (most of those fail in a year or two).  For example, you may need to chose between installing tile floors in kitchens/baths (almost never replaced) vs high end wood-look sheet vinyl (5-10 yr replacement) vs laminate vinyl plank (LVP) (20-25 yr replacement).  These choices are unlikely to impact rent significantly, but they do impact maintenance and operation reserves so it is important to weigh the choice against the business plan.
  • How long can the property be vacant for? This is an often overlooked cost of renovations.  Every day someone isn’t paying rent that counts as a loss of income. If you are tight on money and reserves, you need to consider this loss of income in your business plan. If you can’t find quality people to do the bigger lift work quickly and in your budget, doing a smaller but faster face lift may work best.  Changing out cabinet and door knobs, bath hardware and a fresh coat of paint can work wonders and can be done in a few days.
  • What finishes are readily available?  With the supply chain issues, sometimes the finish we want is not there.  Or consider that picking a specialized light fixture that then gets broken can delay a later turnover.  Picking from finishes that are readily available in your market and likely to continue to be helps source materials quickly even after the project is done.

4. Review the plan and get feedback

Steps 1-3 guide you to a solid plan for your property renovation.  If you’re relatively new to the market, now is a good time to ask for feedback on the plan before you execute it.  A property manager (or a few) are best if you have developed those relationships already.  If not brokers are another good source because they see sales and comps all day and generally want to get on your good side for when you go to sell (or buy a new property) at some point.  Use this time to cross-check your research data as well.


Deciding to do an interior renovation can have a very positive impact on a properties return on investment, often called “forced appreciation” because they can lead to higher income which increase the overall property value.  

To avoid spending more than needed or spending to little and not getting the right impact, ensure you have a solid plan by following the steps above.


Have questions?  Want to talk about renovations more?  

We’d love to hear from you!  Click “Connect” at the top of the page and set up a call, email or just sign up for Club Clover to get our newsletter.

Re-framing Uncertainty into Opportunity

It’s time to re-frame uncertainty as opportunity!

Commercial real estate is at its core the difference (spread) between how much you make vs how much you owe. That means pricing is very dependent on debt costs (interest rates). The current situation is:

    • Sellers are largely still asking for pricing from early 2022 – when debt was in the 3.5% range
    • Buyers are putting together offering prices based on debt costs at 6%+

That’s a significant spread!

As a result, not many transactions are happening. No one wants to move their offer/ask 25%+ in this environment. And unlike when we bought property in COVID the Fed is currently working to slow the economy down. That means buyers really don’t want to come up when there’s a good chance more headwinds are coming.

Here’s the opportunity though – that means there are owners (potential sellers) getting squeezed. A lot of owners used short-term leverage to buy and assumed small, no, or (*big red flag*) negative cap rate growth… that means they are no longer able to give the expected returns to investors.

Some of those HAVE to sell to cut losses:

    • They can’t refinance out of the short term loans with high rates and still cover their costs with property incomes.
    • They can’t hold it without asking investors for more money to lower loan-to-value (LTV)…and getting more investment is unlikely to happen in the current environment.
    • They get the choice of selling for a much lower return or holding and hoping the market changes before they run out of operational income.

These are the owners who will cross the spread first.

It means opportunity for those that focus on managing operations and kept underwriting conservatively throughout the good times. That’s what we do at Club Clover. We keep making offers where we know we will protect our investors. We are in the arena working to find the right deal that prices in the uncertainty and take advantage of this opportunity.  All while continuously improving our operations at existing properties to add more value to investors.


Cap Rates 101

Capitalization rates (cap rates for short) are one way to talk about estimated investment returns in real estate.  You’ll hear them mentioned a lot, such as “the cap rate is too low for this market”.

What is a Cap Rate?

The cap rate indicates the rough return on investment for a specific property at a specific point in time.

Net operating income (NOI for short) = how much a property makes after all expenses are paid except the mortgage (if applicable).

Market Value = how much the asset would sell for.

NOI/Market Value = Cap rate

Simple right?

Be careful – the NOI is calculated in different ways incorporating different expenses for different properties.  Market Value is what someone (including you) is willing to pay for it and will be different depending on different buyers’ situations (such as who can get better loan terms or have access to economies of scale to reduce costs after closing).

Ask which ones are included, walk through the assumptions or do your own due diligence.  You absolutely have the right to access the underwriting, expense and income information for a property before investing.  Keep in mind numbers can be adjusted a lot to support the point of whoever is running the calculations. The banks all get this, as an investor it is important you do too. If someone won’t share the data with you so you can check it, that’s a red flag.

What do I use a Cap Rate for?

There are a few general trends for cap rates:

  • Properties perform better when they are bought at a high cap rate and sold at a low cap rate.  This typically involves adding value to the property and/or changing market conditions.
  • Properties with lower risk tend to have lower cap rates than properties with higher risk.

The most useful thing is to compare properties in the same market.

Say a broker is offering a property at a 5 cap (that’s shorthand for a 5% capitalization rate). If other properties in the area are selling at a 6 or 6.5 cap, that’s a flag that either this property is much lower risk than the others OR the market value is higher than it can bear OR expenses have been creatively book kept to be very low.  Or a combination.  No matter which, it’s a flag to go dive deeper into the property finances.

For investors, cap rates can also raise a flag that underwriting may not be conservative.  If the cap rate at purchase is the same or greater than the assumed cap rate at sale, the underwriting is not conservative.  Banks generally assume an increase of 0.15/yr, so on a 5 yr hold 0.15*5 = 0.75 increase in cap rate.

Fun fact: the cap rate assumed at sale of a property is called the reversion Cap rate

Cliff Notes Questions for Investors

If you’re looking at a deal, here are a few Cap rate questions to ask the people who are underwriting it:

  1. What is the current cap rate and reversion cap rate?
  2. What are the cap rates for 3-4 similar properties in the same market?
  3. How have the expenses used to calculate NOI changed over the past 3 years?
  4. Will you walk me through your underwriting (or send me a link to it)?

If you have questions or want to learn more, set up a call and Join Club Clover.


How Do I Discover My Goals?

Reshaping your life begins with a goal.

Sometimes we are so stuck in our life habits that it is difficult to figure out what our goals are for our lives.  This guide will help lead you through a thought process for identifying current goals.

Then come back to this at least once a year, preferably more often, to change and adjust them as your life adapts.

Also?  This should be fun!  Turn on some music, pull in a partner or pet, and most importantly view this as an enjoyable next step towards living your best life!

Step 1: Dream Up

Answer the following questions, it helps to write them down so you can reference them later

  • What are your favorite things to do right now?
  • What do you see others doing and wish you had the time/energy/money/whatever to try?
  • What is the most exciting and fulfilling thing you can think of doing in this life?

Now take each of your answers and answer the following:

  • What would make this even more epic?
  • Would combining any of them make it even more unbelievable?
  • How many people would you want to do it with you?  Does more or less people sound more fun?


One of my favorite things to do is play volleyball.  I love the team aspect of it, the way everyone knows their role but also can step in to cover for everyone else.  I dream of being able to go play 1-2 times a week.  Making that more epic to me would be getting to play on an island (Hawaii? Thailand? Madeira?) in perfect weather with a group of people I enjoy, for a few weeks, focused only on being in the moment and enjoying every second.

Step 2: Drill Down

Pick the activities that made you smile the biggest for now.  You can come back and do this step with the others later.

Now ask yourself: Why does this seem hard or unachievable?  List all the reasons you can think of. It’s very important to write these down.  The more detail the better.

Back to our example:

For me this is hard because (1) I haven’t played volleyball in a few years thanks to a combination of Mom life and COVID, (2) Therefore I don’t have a group of friends that I play with right now, (3) I don’t have a budget or free time to go on a trip like that.

Step 3: Start Small

For each of the reasons in Step 2, think of 1 small thing you can do to make that a bit easier.

Here are a few ideas:

  • Take one deep breath to think clearer
  • Search for a related word on the internet
  • Ask for advice (a partner, a pet, a stranger)
  • Write down all words/phrases related to it

  • Do one squat
  • Transfer $1 to savings
  • Each one less french fry
  • Send one thank you text

Example continued:

Starting small ideas (1) would be searching for volleyball courts as close to my house as possible along on the internet.  (2) Asking my social media groups if any of them play or know of groups that play (3) Researching options to fund a trip like that which won’t impact my normal budget (passive income from real estate perhaps?)

Step 4: Grow Large

Ask yourself, which of these small steps can I do a few times a week? For 2-3 of them, set a recurring reminder on your phone to do it.  If you miss it, do it the next time.  More than 2-3 can be overwhelming at first, so give it a few weeks of trying and then add in (or change to) another.

Each time you do one, have a mini-celebration!  Play a song, do a dance, hug a kid/pet/plant, or a fist pump.  Each one is a step towards that big dream, and you’re training your brain to work towards your goals.  That’s a big change in your life’s direction!

As you integrate these small steps towards making “unachievable” into “I can do this”, you will naturally try more than you can handle, fumble, learn, then try again.  Congratulations, this means you’re working towards your goals.

Example finale:

I picked reason 3 (budget and time constraints) to focus on for now.  Seeing the progress towards the goal in a relatively short time is what prompted me to start Club Clover so that I can empower others to find their path.

The Plan

These small steps turn into larger ones, and every time you go through the exercise you get better at identifying commitment mechanisms that work for you.  One key thing is to write down your goal and post it in a visible place.  Look at it every day.  Change it as you want.  Keep updating and working the plan to overcome the obstacles, and “unachievable” turns into “hard” turns into “might happen” and finally into “I DID IT!”

Once you have your goals, Iet’s chat about if real estate investing fits into your current plan.  It’s a powerful tool to overcome the common budget and time freedom obstacles often between us and our goals.  I’d appreciate the opportunity to help you to achieve your goals.

More Resources:

If you’re looking for an interactive way to think through this, or want more data on how to set and achieve goals, try WOOP.  It’s 20 yrs of science in a simple to understand way.  Or if you prefer audio, try this The Happiness Lab episode to start.