Knowing the difference will help you make the right real estate investment choice
Whether you’re an experienced investor or you’re just starting out, you know that every deal is different. The commercial real estate market is full of properties to choose from, and it can be hard to differentiate between them without some insight.
Understanding the risks and potential rewards is essential when choosing the right property to match your investment goals. To help you, our multifamily advisors have compiled a list of the different investment types you’ll encounter in the commercial real estate market.
Core investments are considered the least risky commercial real estate type. Generally, they’re stabilized, fully leased properties in great locations. They offer moderate appreciation in value with stable, predictable cash flow with relatively low risk.
– Key characteristics of a Core investment:
– Long term leases in place with high credit tenants
– Highly desirable location
– Requires little to no improvements
Core Plus investments also exist. They share many of the same characteristics as a Core investment, but provide some opportunity to increase the net operating income through improvements.
Value Add investments are generally those that are not operating at their full potential. They can be a popular choice for real estate investors, because they offer steady cash flow with the opportunity to make improvements that will force appreciation.
Key characteristics of a Value Add investment include one or more of:
– High vacancy rate
– Leases below the market rate
– Poor physical condition
– Improperly managed
To learn more about Value Add investments, read our blog post.
Opportunistic investments are the most risky choice for a commercial real estate investor. They generally require substantial physical or operational improvements and offer little to no cash flow in the short term. However, they offer the highest return if the owner can execute their improvement plan successfully.
Key characteristics of a Opportunistic investment include one or more of:
– Fully vacant
– Requires significant physical improvements
– Opportunities for substantial appreciation
So which commercial real estate investment type is best? There’s no right or wrong answer—it all depends on your individual situation and your investment goals. It’s also important to be aware of the current market conditions that may affect a potential deal. An experienced multifamily advisor can help you decide what type of property is best for your portfolio.
If you’re ready to make your next commercial real estate investment, the team at 100Units.com is here to help. Our commitment is to provide the insight and advice you need to secure the best multifamily investment property. Contact us to learn more.