What are Core, Core Plus, Value-Add and Opportunistic Investments?

When we evaluate investment opportunities, we categorize them into one of 4 categories that are fairly standard across real estate investments. The four types are Core, Core Plus, Value-Add and Opportunistic. The different categories are defined two different factors:

  1. The physical characteristics of the property (for example the length and term of the in-place leases, the credit worthiness of the tenants and the physical condition and location of the building or land).
  2. The amount of debt used to capitalize a project as this defines the risk of the project.

The categories range in risk from conservative to aggressive. 

Graph mapping investment types

Four commercial real estate investment types

Core real estate investments 

  • Risk profile: Conservative.
  • Investor type: For investors looking to generate stable income with very low risk. 
  • What defines the risk level?  A Core investment usually requires very little management from owners and are usually occupied with tenants on long-term leases. Core investments are typically acquired and held. This type of investing is as close as one can get to passive investing when buying properties directly.
  • Example: Our Starbucks at 45604 Airport Road, Chilliwack, BC. property.
addy: Starbucks in Chilliwack

Core Plus real estate investments

  • Risk profile: Low to moderate
  • Investor type: For investors looking for little risk with some upside.
  • What defines the risk level? A Core Plus investment can typically increase cash flows through light property improvements, management efficiencies or by increasing the quality of the tenants. Similar to core properties, these properties tend to be of high-quality and well-occupied. 
  • Example: Our downtown Vancouver property, The Lex.
Front of building at 1249 Granville St Vancouver, BC
addy: The Lex in Vancouver

Value-Add real estate investments

  • Risk profile: Moderate to high.
  • Investor type: For investors willing to take on more risk to achieve high returns and are willing to wait longer before they begin receiving returns for their investment.
  • What defines the risk level?  A Value-Add investment often has little to no cash flow at acquisition but has the potential to produce a tremendous amount of cash flow once the value has been added (for example physical upgrades, better management, added services or more effective marketing).
  • Example: Our Calgary property, The Park at Willowglen.
The Park at Willowglen Value-Add Property
addy: The Park at Willowglen in Calgary

Opportunistic real estate investments 

  • Risk profile: High.
  • Investor type: For investors willing to take on the most complicated projects and may not see a return on their investment for three or more years. 
  • What defines the risk level?  An Opportunistic investment often has little to no cash flow at acquisition but has the potential to produce a tremendous amount of cash flow once the value has been added. Examples include developments, acquiring an empty building, land development and repositioning a building from one use to another.
  • Example: Our Maple View Heights purpose-built rental in Mission, BC.

 

addy: Maple View Heights in Mission

It’s very important to understand the different types of real estate investments when making an investment decision and weigh these characteristics against your own risk/return tolerance or speak with a professional for advice about what is best for you. 

Invest with addy

The great thing about addy is that you can dabble in many different types of investments with a dollar amount that fits your budget and risk tolerance level. Our crowdfunding real estate model spreads out the cost and the risk across many parties. Because we are a limited partner, your only liability is your investment amount. You can sign up today to learn more about current and forthcoming investment opportunities and start your crwodfunding real estate journey today.

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5 thoughts on “What are Core, Core Plus, Value-Add and Opportunistic Investments?

  1. yidong zhao says:

    I have a question about cash flow, if I invest in a project. Is that possible to get money back each month?

    • Katie Kernahan says:

      It depends on the property! If a property has a distribution (that’s real estate speak for a dividend) those details will be outlined in the Offering Memorandum for that property and you can see the details also listed on the property page. We recently surprised our investors in The Park at Willowglen located in Calgary with a distribution! You can learn more about that here: https://www.addyinvest.com/2021/05/14/a-surprise-distribution-for-calgary-investors/

    • Cameron says:

      I doubt we will see monthly distributions on any single property. Some will pay quarterly and others annually. Simply easier given the number of investors and work required to put together a distribution. However if we invest in multiple properties, they will make distributions at different times so overall there will be frequent cashflow to enjoy.

  2. jonathan Bois says:

    J’aimerais adhérer je parle le français et j’habite mtl Québec avez vous un projet en français ou votre site aura t-il un onglet français bientôt

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