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I Hate Risk...

The best risk management plan, is to fully understand your risk, your stop loss and your exit, before entering the trade.

I hate risk...

Every investment has risk, however some assets carry more risk than others. When we are speaking specifically about real estate, risk comes is a variety of forms.

Our entire investing philosophy is built on limiting risk and controlling the controllables. I have seen a lot of investors choose a market because its convenient or because the prices are “cheap”.

However time, cost and quality are not congruent.

Cheap does not imply a good deal and easier doesn’t imply better.

In everything, a great deal requires more time and a greater amount of upfront cost to obtain a better quality product.

The name of this game is - ‘Control Risk’.

There is nothing wrong with risk, as long as you are prepared for it.

Another word for risk is what could go wrong, goes wrong.

How do we control risk?

The best risk management plan, is to fully understand your risk, your stop loss and your exit, before entering the trade.

There are a number of factors to consider as you underwrite your deals:

  1. The economy
  2. Vacancy
  3. Number of doors
  4. The Market
  5. Population
  6. Population Growth
  7. Employment Growth
  8. Income Growth
  9. Net Migration
  10. Employment Distribution
  11. Environmental Stability & Predictability
  12. Unemployment
  13. Rental Vacancy
  14. Capitalization Rate
  15. Homeowner Vacancy
  16. Multifamily permits
  17. Absorption
  18. Affordability
  19. Proximity to other MSA’s
  20. The submarket
  21. Violent Crime
  22. Income/Unemployment
  23. Schools
  24. Debt- Non- Recourse vs. Recourse
  25. Tenant quality
  26. Age of property
  27. Class of property: A class, B Class, C Class etc
  28. Property management
  29. Demographics

Sincerely,

Samson Jagoras

CEO/Asset manager