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Strategies fall into 4 main buckets in commercial real estate. Core, core plus, value add, and opportunistic.

Examples below:

Core: Purchase a central business district office building with no to low leverage (up to 30% leverage). This office building will be fully leased or near full occupancy, class A, and low leasing risk. Additionally, there will not be a large vacancy coming up (that you would know about).

Core Plus: Think moderate risk moderate return. Use slightly more leverage and purchase a core building. Generally this building will need some value added enhancement (lease up, capital, etc.)

Value Add: This is a medium-to-high-risk/medium-to-high-return strategy. It involves buying a property, improving it in some way, and selling it at an opportune time for gain. Properties are considered value added when they exhibit management or operational problems, require physical improvement, and/or suffer from capital constraints.

Opportunistic: This is a high-risk/high-return strategy. The properties will require a high degree of enhancement. This strategy may also involve investments in development, raw land, mortgage notes, and niche property sectors.

Within these strategies you can have a lease up play, redevelopment play, a strategy based upon the development moving to where you purchased, etc.

 

Blackstone follows a "Buy it, Fix it, Sell it" approach. They buy distressed properties, add value, and sell them.

One example is they bought thousands of single-family homes after the financial crisis hit with the idea that the housing market will recover and they will make a nice return since they bought the properties at a low price.

Another deal they did was a casino/hotel in Vegas that was a foreclosure.

If you are really into real estate, listening to Jon Gray speak about it is interesting and informative.

 

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