Limiting Your Liability: Mortgage Financing Risks
A recurring theme in our writings is managing risk in real estate investing. While most investors understand that debt can be a powerful tool to enhance returns, it is a “double-edge sword” that may increase the risk profile of an investment. However, a lesser understood risk of mortgage financing is its potential to increase losses beyond the amount of equity invested.
What is a Credit Rating?
A key concept in real estate investing, particularly with single-tenant, net-leased properties, is the credit quality of the underlying tenant. A credit rating is an estimate of an entity’s ability to honor its financial commitments.
8 Ways to Mitigate Risk in Real Estate Investing
Part 3 in the Realized Series "Risk Management and Real Estate" Part 1: Risk In Real Estate Investments Part 2: How to Reduce Risk in Real Estate Investing “Quick buck artists come and go with every bull market, but the steady players make it through the bear markets.” -Lou Mannheim to Bud Fox, Wall Street (1987 film)
How to Reduce Risk in Real Estate Investing
Part 2 in the Realized Series Risk in Real Estate Investments Part 1: Risk In Real Estate Investments Part 3: 8 Ways to Mitigate Risk in Real Estate Investing
Risk In Real Estate Investments
Part 1 in the Realized Series "Risk Management and Real Estate" Part 2: How to Reduce Risk in Real Estate Investing Part 3: 8 Ways to Mitigate Risk in Real Estate Investing
Real Estate As An Inflation Hedge
Inflation, from an economic standpoint, can be defined as a prolonged increase in prices of goods and services. If inflation rises faster than your income or value of your assets, in effect, you are losing ground on your purchasing power or real (inflation adjusted) net worth. It’s no wonder that savvy investors are concerned with inflation and turn to real estate as an important piece of their investment portfolio.
Losing Money in a 1031 TIC?
Recently, I’ve had several conversations with real estate investors who own Tenants-In-Common (TIC) replacement properties that are going to be sold in the near future. In each case, sometime during the past decade they used part of their 1031 exchange funds to purchase TIC properties that are now being sold because mortgage is coming due. Unfortunately, several of these investors will receive substantially less in sale proceeds than they originally invested due to poor property performance. Needless to say, these folks aren’t real happy.
Tax Reform May Eliminate 1031 Exchanges & Mortgage Interest Deduction
Part 1 in the Realized Series "2017 Tax Reform Impact on Real Estate"
Benefits of Real Estate Investing
According to a Morgan Stanley Wealth Management Investor Pulse (December 2013) survey of 300 millionaires, 77 percent indicated they owned real estate as an alternative investment – more than double the next closest choice of alternative investments.¹ With so many investment options these days, real estate remains the investment of choice for several reasons:
Fractional 1031 Investment Benefits
Real estate investors contemplating a 1031 exchange must make many decisions regarding their choice of replacement property. Investors must determine the type of property, location of the asset, and whether or not to reinvest into multiple assets. Investors then have to thoroughly evaluate their options and select just a few potential choices -- all within 45 days from selling their investment property!
