In this episode of the Real Estate Runway Podcast Quatro Roundtable Edition,Chadand Kim Wendland delve into a failed real estate investment project. They explore why the investment seemed promising, citing factors like its location in a high-rent growth market and potential for organic rent growth. The partners then examine the unexpected risks that arose, such as eviction moratoriums during the pandemic, increased security needs, and issues with pre-1975 water lines. The conversation highlights the importance of effective risk management in rental property investing, with Kim sharing her three principles: understanding risks, finding ways to minimize them, and being proactive. The partners emphasize the need for proper insurance coverage and advise hiring an independent adjuster if necessary. Finally, they discuss creating a physical baseline document of your property as a risk mitigation strategy. Join the conversation as they share their experiences and insights on managing risks for successful real estate investing.

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[00:00 - 03:20] Opening Segment

• Introducing Amy to the show

• Real estate investments come with inherent risks, and success in this industry depends on how well investors and operators handle those risks and prevent others

• Effective risk management is key to successful asset management

[03:21 - 11:58] Risk Mitigation in Real Estate

• Due diligence is key in evaluating a potential property investment and understanding its potential challenges and risks

• It's important to identify and control risks that can be managed, and prepare for risks that are out of control, such as natural disasters or government policies

• Turnover of the tenant base is a crucial part of the business plan, but it can also be impacted by external factors, like eviction moratoriums

• Despite challenges, staying flexible and finding creative solutions, such as cash for keys programs, can help mitigate risks and ensure success in a real estate investment

[15:23 - 23:11] The Challenges of Maintaining Order in a Post-Pandemic Community

• Local government support is crucial for property management industry to overcome challenges

• Police shortage leads to decreased service, prolonged response times and increased crime

• Inspecting plumbing before property purchase prevents expensive repairs, including water meters, drain lines, and cast iron pipes checks

• Keeping track of the property's billing cycle to prevent overpayment and spot potential issues by monitoring bill frequency and irregularities/credits

[23:12 - 31:02] The Challenges of Maintaining Order in a Post-Pandemic Community

• Be cautious of accepting erratic bills and be aware that the true cause of such bills may bring peril

• Plumbing is a basic necessity but can be expensive and may cause a problem for residents

• Consider allocating capital for unexpected expenses

• When dealing with underground pipes and the unknown unknowns, it's important to have a plan and be liquid in all phases of crisis

[31:03 - 34:04] Closing Segment

• Proactively manage risk by having due diligence and contingency plans in place to minimize impact, and being proactive rather than reactive

• Not all risks are in your control, but all will have an impact, so focus on eliminating, preventing and minimizing the impact to ensure a positive outcome in the long run

Quotes:

"Be proactive. Do not wanna be reactive, and if you have to be reactive, ensure the heck out of it. ” - Kim Wendland

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Real Estate Runway Podcast is all about alternative business and investment strategies to help you amplify life, and maximize wealth! Click here to find out more about the host, Chad Sutton.