STRATEGY
EVALUATION
The Risks You Didn’t Consider
ASSESSING ALL LAYERS OF RISK IN REAL ESTATE INVESTING
by Steve Streetman
ost investors will evaluate potential investments and account for scenarios that would negatively impact their investment returns. They describe this as risk assessment or risk management, though technically it is a threat anal- ysis (see my article in Think Realty in June 2020 for a more thorough explanation). M
Real estate investors tend to focus on operational risks. What is the tenant base like? Will they be able to continue paying rent? Are there physical issues with the property that could result in large expenses – new roofs anyone? Some real estate inves- tors go deeper into market issues. Is the locality landlord-friendly? Is there a broad base of jobs so that one
industry or one company failing can’t destroy your profitability. These are important risks to understand and assessing them is a good practice that all investors should follow. But there are other layers of risk that investors need to understand. The first that every investor in these times should be concerned with is inflation risk. The government (mis)
58 | think realty magazine :: june 2021
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