Today, my guest is Michael Hironimus with Duckridge Realty Services. He provides private asset and portfolio management, market analysis instruction. He's an instructor for market analysis. And he's also a CCI M chapter president. And in just a minute, we're going to speak with Michael about the current commercial real estate condition of the various asset classes and trying to look beyond the current situation and where things might go.

J. Darrin Gross

I'd like to ask you, Michael Hieronymus, what is the BIGGEST RISK?

Michael Hironimus  

Oh, goodness, the biggest risk. If you're just talking about the commercial real estate industry, overall, I would say the biggest risks that I can think of at this point would be dry up and liquid and access to debt. And a significant shift in interest rates. A lot of the acquisitions that have been occurring have been at, you know, compressed cap rates, and so forth. If we have a large push on interest rates, there's one of two things that can happen either your risk premium, the cap rates are built upon us is going to compress even further, which is probably going to mean to drive people out of the the asset type, or you're going to have increases in capitalization rates, which is going to have severe effects on valuations for all the asset types, really. So I would say that's the biggest risk at this point. The other risk to that I think, at least off from an investor perspective, and, you know, we try to we try to balance this out and be conservative is that and I've seen this in the past, we saw this in the great financial crisis where sort of whatever has happened in the past people project into the future. And so we have these, you know, great rental increases, you know, you're looking at industrial multifamily, even, you know, some increases in retail and office and you go and you try to extrapolate that out into the future, I would say that there's a risk there in that. If you're anticipating those rental increases to continue on. At infinite, that you probably know it underwriting very well. And you may be setting yourself up for risk and potential issues in the future, I would be looking at forecasted demand, looking at jobs, how they're shifting within your metro area, how looking at the changes within the different industries that are focused on your asset type, and be conservative in your underwriting because I think once again, there's there's going to be maybe a slowdown in the future things can't run 100% Hot for forever. So once again, if if these supply chain issues continue, and if interest rates expand, it may signal cooldown in the economy and those rental increases may not continue in the future. So I would say one of the biggest risks is just you know, be conservative in your underwriting when you're doing your acquisitions, and make sure that those those are all increases, make sense and buy on actuals. Today, don't don't buy on anticipated returns in the future.

Today, my guest is Martin Saenz,  Martin is the managing partner of BeQuest Funds. Together with his business partner Sean Muneio, Martin co founded BeQuest Funds with a dual purpose of helping investors grow their wealth and helping mortgage borrowers stay in their homes. He has directly helped over 1000s of families, stay in their homes, and countless more through the influence of his mentorship. And in just a minute, we're going to speak with Martin about note investing. 

For information about Insurance for Lenders click: https://www.buildinginsurancerisk.com/insurance-for-lenders.html

J. Darrin Gross

I'd like to ask you, Martin Saenz, what is the BIGGEST RISK?

Martin Saenz  

I would say compliance, being out of compliance, so missing something in the due diligence process, such as you buy a loan that's outside the statute of limitation, and you and you begin legal activity on that loan, then then you could be held liable as an organization. So there's a risk that way? Property, the collateral, right? That's it, that's really what's backing the the obligation at the end of the day. So not having force placed insurance on a senior lien mortgage note in the house burns down, then, you know, you're not going to get paid, you know, you need force placed insurance, errors in emissions from an insurance perspective. You know, there's just there's, there's so much, you know, we say paper, but this paper is full of words that are written by attorneys. And there's a lot of those pages. So so, you know, just making sure that, you know, say all the promissory note, all the collateral files have been signed and initialed by the, by the, by the bars. And whereby, you know, they're validating that debt to, you know, to be there and existence. And so I would say some of those and then licensing to I mean, you have to have certain licenses to operate in certain states. So if you're, if you're operating out of compliance from a licensing perspective, then you can have a state regulatory body come down on you with fines and in they could they could prohibit you from operating in that state.

Today my guest is Tom Cruz. Tom is a 33 year old real estate investor based in Wilmington, North Carolina. After graduating from UNC W. Tom started wholesaling real estate and then graduated to bind single small multifamily properties. And in just a minute, we're going to speak with Tom about Section Eight real estate investing.

J. Darrin Gross

I'd like to ask you, Tom Cruz, What is the BIGGEST RISK?

Tom Cruz  

I would say the biggest risk in not even section eight housing, but just investment house air rental properties is going to be the tenant selection, because if you think about it, buying the property is very low risk, you can always refinance it, you can always sell it, you can always rent it, you'll always have that demand there, especially if you're buying affordable housing under 100. Grand right. But with a tenant, depending on where you're buying, the risk can be can be huge. I mean, if you're buying in the Northeast, and you put a wrong tenant in there, you could be waiting months to get the tenant out. Obviously, if you're buying in North Carolina, in the southeast, it's a lot more landlord friendly laws. So we can get a tenant out for 150 bucks in three weeks, and they're out by the sheriff. So and also you have the tenant the the damages from the tenant. So if you don't screen the tenant properly, or if you're lazy on that part, me, it could cost you 1000s of dollars, a lot of which, you know, you're gonna be out of pocket for because your security deposit won't handle it, Section Eight is surely not going to come in and handle the damage that a tenant calls independently. So I would say the biggest risk in rental properties is putting the wrong tenant in your asset. Um, and the best way to mitigate that, like I said, is through screening.

Today, my guest is Peter Badger. Peter is an entrepreneur investor, who has been successfully investing in ag development projects since 2016. And he recently joined Farmfolio’s executive team as the chief strategy officer. And just a minute we're going to speak with Peter about the value of owning farmland.

J Darrin Gross

I'd like to ask you, Peter Badger, what is the BIGGEST RISK?

Peter Badger  

The BIGGEST RISK is the macro risk that you, as an owner or investor, do not follow a very data driven due diligence process before you buy. And so I can sit here with my risk matrix and my process, and I go through it. And that's the irony of this, you need to have a risk process, a due diligence process to follow Darrin and most people don't, if I had $1, for every time somebody took a recommendation from a friend, or went to the internet, downloaded a nice glossy marketing brochure and trusted somebody. I there's a there's a famous quote from Ronald Reagan, when he met Mikhail Gorbachev. And I don't know the Russian saying, but it was basically trust, but verify. And that's what you have to do. So the biggest risk for me is that you don't verify you don't have a process, you don't have a due diligence matrix with all these areas to look at, you don't follow the data to make sure that what people are telling you is actually true or not, that they have the track record that they have considered all these aspects in that asset class that you're considering owning.

Today, my guest is Lance Pederson. Lance is the Founder and Managing Partner of Verivest, and the host of the Real Estate Risk Report Podcast.

J. Darrin Gross

I'd like to ask you Lance Pederson what is the BIGGEST RISK?

Lance Pederson  

Yeah, I mean, this is a bias answer but I wouldn't be doing what I do if I didn't believe it. I believe that the lack of oversight and I mean is as it pertains to a limited partner investing into a deal that's controlled by somebody else is just if no one's watching what's going on that's the biggest risk that you're more than likely not being compensated for you know, in whatever return you've been quoted so to me to your to your three step thing I don't know how to transfer it because there's no you know, no one's writing I mean, I've seen a few where you can insurance on stuff like this but that's ridiculous but you can minimize it right? And I think that's what veribest does, is we just we just minimize it. Is it foolproof? No, it's not but it's a big deterrent, right and you take that off the you take that off the table so once again much like concerns the cost of the monitoring and even the light touch in the way we do it to keep that cost down it's certainly minimises what I believe is your biggest risk is just some go sideways they stick their head in their sand and they start moving money out of the deal and you don't become whole because of it. How many times have you heard that?