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Buy and Hold
lol
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.
1) lever the fuck up 2) spray and pray 3) there is no sex in the champagne room
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.
Guys guys guys....don't forget about the "new" (post financial crisis) levered loan on loan (i.e debt fund) lending. It's the new senior non-recourse "75% LTV" way to a 9% IRR. High leverage loan-to-own lending is sexy again! #1/2_/_50 bps_joking
Reply to self...retrade....point up front and a point on the exit...
This is on point! I've been saying these guys have positioned themselves to make bank in the next 2-3 years. Also mezz loan to own.
Buy land because God ain't making any more of it.
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