What Exactly is Lipstick on a Pig?

May 2021
value add vs lipstick on pig

A pig with lipstick is still a pig.

I trust you had a nice Mother’s Day weekend!  Not that we should need an excuse to spend some time with family, but it’s a good excuse nonetheless.  I’m thankful and blessed to have a wonderful mom who is close enough to visit on a Mother’s Day.


On another note it’s amazing we’re already in the second quarter of 2021.  Time flies when you’re dodging COVID.  I’m on my way to Dallas to pound the pavement in search of our next opportunity as well as dropping in to say hello to the team.  I haven’t heard anything back on our Atlanta offer but expect something this week.  We are also planning to put in a couple more offers in the Atlanta metro area on deals that have some great potential.  And last but not least, we’ve got a bunch of new deals in the Midwest that we’re also working through.  More to come.


So, what’s the deal with lipstick on a pig?  Almost all of the deals we make require some sort of capital improvement and after I got the picture below I got to thinking – what exactly is the difference between lipstick on a pig and true value add?  There’s a lot of both going on but they are vastly different approaches to this business.  I think it’s important from an investor’s standpoint to know the difference because it’s a risk factor to your investment.


In general, true capital improvement costs more and lasts longer – which in turn translates into a lower risk investment because it’s more sustainable and more recession resistant.  If you get stuck holding a property in a downturn, all that old, deferred maintenance will literally eat your profit margin alive until it’s gone.  If you’ve done the work up front during the good times you can withstand the economic downturns without a hiccup.  Yes, a little more conservative approach, but one which we really like.

The difference between painting over rotting wood and replacing the rotting wood may seem minimal but think of the long term effects.  The rotting wood only gets worse, the leaks behind the rotting wood get worse, and the safety and aesthetics of the complex really didn’t change – thus lipstick on a pig.  While I don’t pretend to say that we’ve changed every single piece of rotting wood, the goal is to minimize, not overlook, these kinds of things while an asset is under our management.

How about replacing an old plumbing line behind a wall?  You could just wait for the leaks to happen and fix them as needed.  But what about the hassle to your residents and the recurring costs?  What about the intangible reputational bump you get from running a great operation in a sea of humdrum.  Especially when it comes to C-class assets, residents get used to being treated like second class citizens.  Yes, some behave like it but many, honestly most, don’t.  They want a safe and clean home to enjoy and our goal is to provide that.  And if we can do that while generating nearly $4 million in distributions annually (and growing) why not?!

I hope you’ll get a good laugh out of the picture below like I did (it actually belongs to a friend of ours) – and make it a great week!