[November 2023]
1 minute speech_Week 2 in November
Presentation script
Good morning, everyone. Let's dive into the four main real estate investment strategies. There are Core, Core Plus, Value-Add and Opportunistic.
'Core' investments are like the safest, most trusted stocks—good for steady money without much risk. 'Core-Plus' investments give you a bit more money by making older buildings better but still keeping them nice. 'Value-Add' is for those who like a good project, fixing up places to make them worth more and bring in more rent. And 'Opportunistic' investments are the big bet, where you make big changes to a place, hoping for a big payoff.
Choose based on your risk preference and investment goals. Thanks for listening, and may your choices lead to smart and rewarding investments!
First Video
Title : What are Core, Core Plus, Value-Add, and Opportunistic Investments?
Link : https://youtu.be/_BZA2AJkDjw?si=OnZL-t-P_jnNh999
1. Video script
When we evaluate an investment opportunity, it usually goes into one of four categories: core, core-plus, value-add, or opportunistic. And we categorize them using the following components: the physical characteristics, things like the length and term of the in-place leases, the creditworthiness of the tenants, and then the physical condition of the building or the land. The second component being the debt used to capitalize the project. This obviously lets us know the risk involved, and the risks range from conservative, like a core opportunity, to aggressive, like a value-add opportunity. Let's invest together.
Second Video
Title : Multifamily Investment Strategies - Core, Core-Plus, Value-Add, & Opportunistic
Link : https://youtu.be/ZXEJIaBtTZ8?si=KcoSDcBCkez6mKNp
1. Video script
Hey, this is Brian Briscoe. Coming to you with another episode of The Diary of an Apartment Investor Podcast. And we're just going to launch right into it. So today we're going to talk about different investment strategies. A lot of people talk about how to invest or we talk. A lot of firms and they talk about their investment strategy. They tend to use a different type of language than I think most people are accustomed to. We come in thinking A, class B, class C, class D, class value add. And what not but I'm gonna introduce some new terms for some of you will be an introduction of new terms for others will be a review. Of things you probably already know we're going to talk about core, core-plus, value-add and opportunistic and exactly what those are.
I was on a website today from a private equity firm and I was looking for inspiration on a subject to talk about. And when I saw that, I'm like, this is perfect. It's something that I haven't done an episode on yet. And something that I think is very relevant for people. But investment strategies and we're talking about smart strategies.
I think a lot of times the biggest thing to talk about is risk versus reward. Some people want to come in, they want a low-risk investment. And with that low-risk investment, they're OK with a very low return. Some people are more interested in preservation of capital than they are growth, you know. So I want to park my money here and I don't want to lose it versus I want to park my money over here and I'm playing to win big, you know? So very different strategies as far as investments go.
And when we talk about institutional investors who are trying to diversify, trying to have a more balanced portfolio. It takes a little bit of both, some of the lower risk investments with some of the higher risk investments to get to where they want. And so they're looking to balance their portfolio.
But as we talk about each one of these investment strategies or groupings, we're going to talk about the perceived risk and the returns that are actually expected from these. So going from lowest risk to highest risk, the first category is core. The core investment strategy because it has the absolute lowest risk and they also have the lowest returns. But there is a very high probability of receiving these returns.
So, I mean, we'll talk about value add later. But when you invest in a C class value add, you may get a really big pop at the end and you may not, you know, so there's a little lower probability of the returns as we go further down. The higher the risk, the more the volatility. And in the core strategy case, it's low risk, it's not very volatile. It's going to kick out a certain amount of returns at a very high probability rate. So a typical core investment, and we're speaking specifically with multifamily, but you can also talk about core investments with other asset types.
But we're talking about a new or newer apartment complex in a highly desirable location. OK, we're also talking about something that's purchased with relatively low leverage so that it can produce that stable and predictable cash flow. Now a core investment commercial real estate is equivalent to an income investment fund in the stock market. You're there for the income, not for the growth. Now, why newer complexes? Well, they're lower maintenance, lower expense ratio for one. And there there's not likely, once again, it's all about the volatility. It's all about predictability. You're not very likely to have, in fact, go out one month at a brand new apartment complex.
However, in a C-class apartment complex, you may have four HVACs go out in one month, which kills your cash flow for a month or maybe two months in a row. Now, newer is also more desirable from the tenant standpoint. You have newer finishes, newer features. Let's just face it, we plug a lot more things in the wall right now than we did 30 or 40 years ago. So if you're looking at seventies, eighties, vintage value add, they may not have all the electrical capability to handle what a lot of people are plugging the walls these days.
Now, something else we talked about is very desirable locations. Once again, this is going to attract the higher-end clientele with higher incomes.
Third Video
Title : Value Add, Core, and Opportunistic Real Estate Investing Strategies
Link : https://youtu.be/D3aiZrvxqP0?si=jVUJwmeZa2x69jBn
1. Video script
**Intro**
It's the Cash Flow Innovators podcast. Create a deal structured lifestyle freedom, my cash flow innovators. Today we've got a fun episode talking about different strategies when it comes to investing in real estate. The main strategies we're going to talk about are core investments, value-add investments, and opportunistic investments. We specialize primarily in value-add investments, and we'll get into why a little bit later.
**Core Investments**
But first, we just want to do kind of a quick run-through on each strategy and a comparison and analysis. I think clarity in life, especially in your investment acquisition strategy, is so crucial. It can allow you to scale, it can allow for you to network better. When people ask the type of deals you're looking for, you can tell them exactly. One real estate strategy is core investments. These are properties that are low risk and typically have a little bit lower projection returns. When you step into these properties, they are already stabilized, most times fully leased in major markets. They're very well kept, and as a result, when you step into that asset class, you really are buying turnkey. There's not much for you to do. This is for an investor or a fund that is okay with maybe a five to ten percent cap rate. They're going to buy the property, not have to do much, and management's already in place.
**Value Add**
Next strategy is value-add. These are properties that already have in place cash flow but are not at their full potential yet. There are some vacant units, there's room to bring in new tenants, there's room to do cosmetic updates, interior and exterior renovations to increase rent for increased revenue. There are also ways to decrease expenses by operating expenses, by increasing the efficiency of management, placing better management if it's underutilized. We're going to come in there and bring in a whole new system to make it run more efficient and more economically. There's a little more risk and a little more capital expense involved. Right out the gate, you have the purchase price, acquisition price of the asset, and then you also have capital improvements. Depending on the size of the property, those can be a significant amount. The idea is there's expectancy for higher returns, higher profits because you're going to recoup a lot of those profits on the back end as you increase the value and sell the property long term. You're collecting solid cash flow and then eventually selling down the road and recouping all that forced equity.
**Opportunistic**
Next investment strategy is looking at opportunistic properties. These are commonly known as distressed properties. Whether if you're looking at a raw piece of land that needs to be fully plotted out, subdivided, and utilities ran. If this is a vacant building that has not been touched in five, ten, twenty years. If this is a property, for us, it would be a mobile home park that has no homes on it or it's a fifty pad mobile home park and there's only five homes on it. This is a great strategy if someone has a team around them, if they're willing to take on the headaches that are really following this strategy. If they can typically provide better returns for themselves and for their investors. But if this is your first real estate deal, whether it's single-family or multifamily, maybe it's not best to step into a full distressed property that requires a full team around you to execute the game plan. If that is your first strategy or your property that you're looking to acquire, that's okay, but just realize that there's risk and potential headaches that could be required.
**Summary**
To summarize, you have core investments: fully renovated, fully leased, high-class tenants, high-class areas. They don't see a lot of appreciation in value because they've already appreciated; they're at their full potential and they're more liquid. They're always marketable; at any point, you could sell out, and you expect to never be in a depreciated state. Value-add provides potential for a little more profits, a little more returns than core investments, with a little higher risk. Now you're going into secondary markets, lower quality of tenants, lower occupancy, and renovations that need to be done. There's a more drawn-out business plan that needs to be in place, and there's more hands-on management. Opportunistic just takes value-add to the next level: much higher risk, much higher amounts of renovation, lower occupancy, potentially no tenants, and provides tons of room for appreciation and value-add and equity.
**Active Investor**
Why do we focus on value-add? Honestly, that just came from us being active investors. We aren't passive investors; as we started, we started in the single-family space, doing wholesale deals, learning how to do the transaction process, how to close on a property, how to inspect a property, how to do due diligence, how to market a property. As that progressed, we got good at managing these properties, we got good at all the systems and operations that went behind it, and so we leveraged those abilities and that expertise that we developed and started partnering with other passive investors who can invest with us. You need to take a look at which one meets your risk tolerance and your return goals. Are you wanting to gamble a little bit? Are you wanting to get involved in something that requires a little more development with a little more upside?
**Tip**
If you're looking to buy your first rental, looking to syndicate your first deal, looking to buy your first cash flow property, whether it's multifamily or a manufactured home park, when we're talking about capital expenses, acquisition prices, this doesn't have to be your own money. Learn the real estate first, learn how to analyze deals, learn what dictates a good deal. Then, you can go and leverage your abilities that you've now developed of analyzing deals which passive investors don't have the time or necessarily want to devote the time to doing. If you are looking into real estate actively, learn the real estate first, learn how to analyze, start calling on deals, if you get one under contract, you know you can figure out the money.
AMC & Real Estate Investment Strategies 자산관리회사 & 부동산 투자 전략
부동산 자산 투자에는 크게 4가지 단계가 있습니다. 자산관리회사(AMC)에서는 자산 운용 전략을 크게 4가지로 나누어 관리합니다.
1. Core
가장 안정성이 높은 자산 유형입니다. 일반적인 Leasing 운영이 이 경우에 해당 합니다. 기대 수익률은 통상 6~8% 정도로 임차인이 이미 확보되어 있으며 공실율이 낮은 안전 자산을 대상으로 그 임대수익을 배당하는 구조입니다. 안정성이 확보된 투자 전략으로 주로 공제회나 기관에서 선호하는 투자 전략입니다.
2. Core+
Core Plus의 경우 임차인의 임대기간이 얼마 남지 않은 자산을 대상으로 임차 마케팅 작업을 통해 추가 임대료 지불이 가능한 임차군을 확보합니다. 이 경우 기대 수익률 통상 10~12%입니다. Core 자산보다 매력도가 떨어지는 자산을 대상으로 일부 리모델링하거나 임차인에게 Rent-free, Fit-out, TI 등을 제공하여 매력도를 높입니다.
3. Value-Add
흔히 오래되거나 건물의 용도 전략이 잘못된 자산의 경우가 해당합니다. 기대 수익률은 12~18% 수준이며 통상적으로 기존 임차인 명도 후 건물 전체 리모델링 또는 증축(수평, 수직)을 통해 건물 가치를 극대화하는 전략입니다. 앞선 운용 전략대비 중위험, 중수익 전략입니다. 이 경우 리모델링 시 사전 임차 타겟팅으로 임차인이 원하는 사용 용도로 리모델링 하는 경우가 대부분 입니다.
4. Opportunistic
4개 투자 전략 중 가장 고위험, 고수익 전략으로 기대 수익률은 20% 이상입니다. 기존 자산 매입 후 완전히 철거하여 신축건물을 짓는 방법입니다. 때문에 기존 자산 상태는 투자 전략에 영향을 끼치지 못하며 명도 또는 유치권 등을 고려해야 합니다. 당연히 공실율이 높을수록(명도 진행률이 높을수록) 사업진행에 유리합니다. 철거 및 인허가 기간부터 신축 후 매각(또는 분양)까지 상당한 기간이 소요되므로 투자 수익에 대한 예측을 가장 하기 어려운 전략입니다.