For many investors, real estate is a must-do. Real estate as an asset class is something you should be investing in, and you should inform yourself regarding the pros and cons of different types of real estate investments. There are many terms in real estate investing and even in real estate investments of similar types, private equity and institutional investors often utilize different terms to categorize investments. What exactly is an “opportunistic” investment, and what is a “value-add” investment? How do they compare? Read on to learn more about real estate investment terms. Luxe Crowdfunding is a top innovative investment management platform in the United States who will find you the best places to invest in real estate with proven returns. Call us today to grow your assets!
Terms To Learn in Real Estate Investment
Real estate investment strategies function somewhat like a stepladder. “Core” investments stand at the bottom of the stepladder. While these investments are the least risky, they also expect to generate the smallest returns. Your projected returns increase as you ascend the ladder, but so do your risks. Core investments are defined as low-leverage, generally stabilized “trophy” office properties that stand in the central business district of any major metropolitan area, such as in New York City, Chicago, or Washington D.C. Long-term, triple net leases are features of such properties, and there is added additional security for the investor in many cases as the tenants are often national franchises that are supported by rent guarantees from the parent company. Returns are fairly low, around 6-11%, and institutional investors often have core investments in order to generate a reliable, conservative return. Next in line are core-plus investments, which are basically core investments that lack one or two features in terms of stability. Luxe Crowdfunding can help you find the best places to invest in real estate to guide you through such investments.
Terms In Real Estate Investment
Value-added investments are located in primary, secondary, or tertiary markets. The name is fairly self-explanatory- the sponsor is looking to “add value” through changing the property in some way. For example, the sponsor may buy a broken-down property at a discounted price, then renovate it. Or, they may purchase a property with a high vacancy rate and rent the vacant units out through more effective marketing. Much of the increased risk is due to the fact that these properties usually require additional leverage to acquire. Value-added investments can be very successful, as long as the investor is confident in the sponsor being able to make the necessary improvements, and yield returns around 12%-18%. Opportunistic investments are a step higher in risk than value-add investments, in highly distressed properties, new development projects, or properties in emerging markets. They tend to be attractive to sophisticated, wealthier investors who are able to stand the risk of a loss, and can produce high overall returns of over 18%.
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Real estate investing terms can be confusing, which is why it’s so important for you to inform yourself if you’re an investor. Luxe Crowdfunding is a top investment management fund in the United States who can find you the best places to invest in real estate. Call us today for your investment needs!