US commercial real estate: what investments for the pros?
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What are the key investment segments in U.S. commercial real estate for experienced or properly coached investors?
The challenge for investors who are new to commercial real estate is to understand the is to understand the different investment segments. Knowing the differences between Core, Core Plus, "Value Add" and "Opportunistic" will be essential in determining which segment best meets your expectations for returns and risk management. and risk management.
Always keep in mind that these four main segments do not exempt you from segments do not exempt you from doing your homework. There are good and bad deals in every and bad deals in all market segments, and do a good job of analyzing the location, finances, general condition and characteristics of an operation is of an operation is always essential.
Today, we will look at the two main segments with high with high returns and higher risk levels for experienced or accompanied investors investors, namely the Value Add and Opportunistic segments. "Opportunistic".
As a reminder, a Multifamily building in the USA is considered as a commercial asset beyond 5 apartments.
Investment "Value Add", or value creation:
Value-added real estate generally does not have a stable income at the beginning, but a lot of potential. They should be should be considered as investments that will add value to the property and provide property, will bring additional income to the investor. This can be done by increase occupancy, perform major renovations or even change property management even changing property management practices.
While these value-added investments carry moderate to high risk, the risk, the trade-off is a higher annualized return. With good strategic planning and disciplined management, these transactions can can be very attractive and the risk can be very well managed. well controlled. But for this, it is highly recommended to work with real estate professionals in order to achieve the most secure the safest possible operation in a market that has been correctly determined and and analyzed at the beginning.
The investment "Opportunistic:
The most experienced and risk-averse investors can benefit from the potential of an opportunistic can benefit from the potential of opportunistic investing. It with high growth potential, but also investments with high risk. with significant risks. It is a highly technical vehicle that requires planning, construction, development and even conversion of properties for at least three conversion of properties for at least three years before income can be generated. income can be generated.
Of course, while the risk is high, so is the potential return. potential is also high. But it is essential for an investor, even an experienced one experienced investor to surround himself with excellent professionals in this segment to ensure the technical and financial success of the operation.
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