Investing Education

What is an Opportunistic Real Estate Investment?

Core real estate investments

Origin Investments Co-CEO David Scherer explains the five pillars of an opportunistic real estate investment and who should consider investing in them. Opportunistic investments are the real estate equivalent of venture capital, where you’re investing heavily in the earliest stages of development. Investors expect to be compensated for this risk. That’s why opportunistic investments should have the highest expected returns.

The 5 Pillars of an Opportunistic Real Estate Investment

1. Location

Opportunistic investments can vary greatly in terms of location. At Origin, we stay within our target markets, but other opportunistic investors may choose smaller, less liquid cities and submarkets.

2. Vintage

Opportunistic investments have no set range when it comes to vintage. They are often brand-new construction. But they can also be buildings that are entirely gutted and rebuilt. The key with opportunistic is that you’re creating a completely fresh start for the given investment.

3. Cash Flow

Opportunistic investors aren’t paying attention to existing cash flow because there shouldn’t be any. With opportunistic investments, you are reinventing or developing the building and will need to build out that cash flow after construction.

4. Debt to Equity

Opportunistic investing starts at around 70% debt and can go up to about 90% to 95% debt.

5. Expected Returns

Opportunistic investments should have the highest expected return of all real estate investment types because of the substantial risk taken.

Who Should Invest in Opportunistic Real Estate?

Investors who gravitate towards early stage stocks or venture capital should consider opportunistic real estate investments. You should ensure that a high-risk investment fits into your portfolio before considering opportunistic investments.

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.