you believe in global warming or not, buying in some of these areas may pose a risk as the environment changes. The best way to help trans- fer some of this risk exposure is by having the right property insurance even if that includes paying addition- al premiums for coverage such as flood or hurricane insurance. PROPERTYRISK As an investor, it is important to understand that people can also cause damage to your property. If you fix and flip, having equipment from a construction site stolen or having someone steal the copper piping from a property as well as tenants trashing your place on the way out, are a few of the other risks that investors face. It is important to have the proper property insurance in place. Investing in anything always has some sort of risk. When trying to avoid or mitigate risk as a real estate investor, it is important to have experienced professionals like an attorney, an insurance agent, and a CPA on your team to make sure you have everything in place you need to help minimize or remove any kind of exposure you may encounter. •
demand, will all impact how prof- itable and successful a real estate investment will be at any particular time. As most investors know, the real estate market is cyclical— it’s not a matter of whether market con- ditions will change, but when they will change. Some of the best ways to miti- gate risk is by diversifying your asset classes or diversifying in multiple markets. Not all asset classes and markets appreciate or depreciate in the same ways or at the same time. Diversifying will help offset the poten- tial risks if one asset class or market tanks thereby reducing your risk. As we have seen right now, sev- eral cities in the Southeast are benefiting from an increase in home sales, rental demand, high occu- pancy, and increasing rental rates, while major metro markets in the Northeast are suffering from a decline in demand, lowered rent- al rates, and high vacancy rates. Diversifying assets in multiple markets reduces risk from market downturns in one main market.
The same goes for owning a variety of asset classes. Residen- tial real estate has fared rather well during the pandemic, while restaurant, retail, and office spac - es have struggled with many small businesses being forced to close. It is also very important to make sure your real estate portfolio isn’t over leveraged and that you have enough reserves to make sure you can stay afloat should things go south until that market recovers. MOTHER NATURE RISK Flooding, hurricanes, tornadoes, earthquakes, fires, wind damage, hail, or other environmental factors can cause major damage to your property through no one’s fault. One of the best ways to prevent or miti- gate risk caused by Mother Nature is by avoiding purchasing real estate in some of these higher risk areas prone to flooding, hurricanes and earthquakes like Florida, the North- west, or the Gulf Coast. Sometimes this can’t be avoided and whether
Lorraine Beato is an Atlanta, Georgia Realtor specializing in single-family residential homes, investment acquisitions, and upscale renovations.
She is also a former appraiser.
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