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Manage Investor Risk (if you are the principal) | International Residential Real Estate Investors Association
Monday January 22nd 2018

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Manage Investor Risk (if you are the principal)

Just the other day, a friend of mine called looking for a quick replacement investor.  Her committed investor changed terms on her at the very last moment.  The terms demanded 1) came on the closing day, 2) arrived after the seller had signed, 3) were given with my friend already guaranteeing the loan, and 4) would push the project into the red at closing.

While this is an underhanded move, equity holders frequently seek strength in this way.

As investors, how do we protect against this?

I’d preface my remarks by saying that I’ve been in this position and I won’t go there again.

The key is to take several steps to protect your position including:

1) Require investors to deposit funds prior to closing with pre-agreed release terms.

2) Have a stable of investors prepared to fill in should someone flake out.

3) Keep room in your deal for a shortfall.

4) Stay within easy reach of resources at your disposal.  Stretching creates extreme risk.

Good luck and good hunting.

Real Estate Investor

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