Quick Take: A core plus real estate investment refers to a stabilized property that generates reliable income but offers additional opportunities for modest value creation. These investments typically involve well-located assets with strong fundamentals that may benefit from operational improvements, leasing upside or light renovations. Core plus strategies generally offer higher return potential than core real estate investments while maintaining relatively moderate risk.
Understanding core plus real estate investments
Real estate investment strategies are commonly categorized based on their risk and return profile. Within this framework, core plus real estate investments sit between core and value-add strategies on the risk spectrum.
Core plus investments typically involve properties that are already stabilized and generating income but may offer opportunities for incremental improvements. These improvements could include modest renovations, operational efficiencies or lease adjustments that enhance the property’s performance over time.
Because they combine stable income with potential for additional value creation, core plus real estate investments are widely used by investors seeking a balance between stability and growth.
For a broader overview of how these strategies compare, see our guide to core, core plus, value-add and opportunistic real estate investments.
Key characteristics of core plus real estate investments
Core plus real estate investments generally share several defining characteristics:
• Stabilized properties with strong occupancy
• Locations in desirable or growing markets
• Reliable rental income from existing tenants
• Opportunities for operational improvements
• Limited renovation or repositioning requirements
These properties often require more active management than core investments, but they typically involve far less risk than value-add or opportunistic strategies.
For example, an apartment community with strong occupancy but slightly below-market rents may qualify as a core plus real estate investment if modest upgrades or improved management could increase rental income.
Examples of core plus real estate assets
Core plus investments can be found across many property types, provided the asset is stabilized but offers opportunities for incremental improvement.
Common examples include:
• Multifamily communities with potential for moderate interior renovations
• Office buildings with upcoming lease rollover that could support rent growth
• Industrial properties with opportunities to improve operations or tenant mix
• Retail centers where improved leasing strategies may increase occupancy
In each case, the property already produces income but may offer opportunities to enhance performance through targeted operational improvements rather than major redevelopment.
Risk and return profile of core plus real estate investments
Core plus strategies generally offer moderate risk and moderate return potential relative to other real estate investment strategies.
Because the properties are typically stabilized, investors benefit from ongoing rental income. At the same time, modest improvements can increase property value and rental revenue over time.
Returns from core plus real estate investments are typically driven by a combination of:
• current rental income
• rent growth
• operational improvements
• property appreciation
This balance of income and value creation often appeals to investors seeking more growth potential than core investments without taking on the higher risk associated with value-add or development strategies.
Core plus real estate vs other investment strategies
Core plus real estate represents the middle ground within the real estate investment strategy spectrum. These investments offer greater potential for value creation than core properties but generally involve less risk than value-add or opportunistic strategies.
| Real estate investment strategy | Risk level | Income stability | Value creation |
|---|---|---|---|
| Core real estate | Low | High | Limited |
| Core plus real estate | Moderate | High | Incremental improvements |
| Value-add real estate | Higher | Moderate | Significant operational improvements |
| Opportunistic real estate | Highest | Variable | Development or major repositioning |
Investors frequently compare core plus investments with other strategies across the spectrum.
You can learn more about these strategies in the following guides:
• What is a core real estate investment
• What is a value-add real estate investment
• What is an opportunistic real estate investment
What makes a good core plus real estate investment?
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.
How core plus real estate investments fit into a portfolio
Core plus real estate investments are often used to balance income stability and growth potential within a diversified real estate portfolio.
Because these properties already produce income while offering opportunities for operational improvements, they may help investors pursue:
• stable cash flow
• moderate appreciation
• diversification across real estate strategies
Many investors combine core plus investments with both core assets for stability and value-add opportunities for greater upside, creating a balanced real estate allocation across different risk profiles.
There is a private real estate investment strategy for virtually every investor.
Key Takeaways
- A core plus real estate investment typically involves a stabilized property with opportunities for modest value creation.
- These investments generally offer higher return potential than core real estate while maintaining moderate risk.
- Core plus strategies often involve operational improvements, leasing strategies or limited renovations.
- Investors frequently use core plus investments to balance stability and growth within a diversified real estate portfolio.
FAQs
What is a core plus real estate investment?
A core plus real estate investment refers to a stabilized, income-producing property that offers opportunities for modest operational improvements or value creation.
How is core plus different from core real estate?
Core real estate investments focus on fully stabilized properties with minimal operational changes, while core plus investments involve incremental improvements that may enhance income or property value.
What types of properties are considered core plus real estate?
Core plus real estate investments may include multifamily, office, industrial or retail properties that are already stabilized but offer opportunities for rent growth, operational improvements or light renovations.
Are core plus real estate investments risky?
Core plus investments typically involve moderate risk because the properties already generate income, but additional improvements introduce some operational risk.
Why do investors allocate to core plus real estate?
Investors often allocate to core plus strategies because they provide a balance between stable income and the potential for moderate value creation.
