Core Plus is synonymous with ‘growth and income’ in the stock market and is associated with a low to moderate risk profile. Core plus property owners typically have the ability to 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.
The potential downside of a core plus real estate investment is that the cash flow is less predictable than a core investment, and these properties require active participation by ownership. A 15-year-old apartment building that is well-occupied but in need of light upgrades is an example of a core plus investment opportunity. The property will produce ample cash flow but some of the cash will be used for future deferred maintenance such as roofs and parking lot repairs.
Core plus investors tend to use between 45% and 60% leverage and expect to achieve returns between 8% and 10% annually.