Investing Education

What Is A Core Plus Real Estate Investment?

Core real estate investments

Origin Principal David Scherer explains the five pillars of a core plus real estate investment and who should consider investing in them. Core plus assets are very close to being hands-off and stabilized, however, these investments contain minor risk factors which need attention.

1) Location

Core plus assets should be located in cities (and submarkets) where liquidity is never an issue. The most lucrative real estate markets, which you can read about here, all provide ample liquidity to allow quick entrances and exits from assets. A core plus asset might be slightly removed from the areas with the highest liquidity, but it needs to be liquid.

2) Vintage

Core plus assets can be slightly older than core assets, and include minimal renovations to those older properties. They might be up to 20 years old, and as long as the improvements required are minor, the asset can maintain its “core plus” label.

3) Cash Flow

A core plus asset might not achieve its maximum cash flow until some minor improvements are made. Once that has been done, core plus assets should behave similarly to a dividend stock such as Coca Cola; investors can expect a reliable income stream with moderate growth.

4) Debt to Equity

A core plus asset can be anywhere from 45-60% leveraged.

5) Expected Returns

Returns vary, but generally speaking, an 8-10% return can be expected with a core plus investment.

Who Should Invest in Core Plus Real Estate?

Anyone looking for a reliable income stream should consider core plus investments, either directly or through a fund. While core plus may not have quite the same level of safety as a core investment, you can feel secure in knowing you’re investing in an asset that is extremely close to becoming a reliable income stream with a few minor improvements.

This article is intended for informational and educational purposes only and is not intended to provide, and should not be relied on, for investment, tax, legal or accounting advice. The information is provided as of the date indicated and is subject to change without notice. Origin Investments does not have any obligation to update the information contained herein. Certain information presented or relied upon in this article may come from third-party sources. We do not guarantee the accuracy or completeness of the information and may receive incorrect information from third-party providers.