Risk management is a multifaceted discipline that involves recognizing, evaluating, and ordering risks according to priority and type. Most risks are unique to a business or service. For example, fluctuating loan rates might cause a tenant to have difficulty in meeting high payment requirements. Simply put, individuals involved in any industry should focus on identifying the risks inherent in their line of work.
Four main methods exist in dealing with risk. First, you can accept the consequences of risk and budget accordingly. Second, the investor can attempt to minimize damage by installing multiple layers of backup software to protect data. The third method sees risk transferred to another party, such as by insuring against certain types of accidents. Finally, the investor might shut down an area deemed too risky for operation without shutting down the entire business.
About the Author
David Mendivil González is a real estate industry expert specializing in risk management. The Director of Grupo Desarrollador del Noroeste, S.A. de C.V., Mr. Mendivil González has more than 15 years of experience.
As the real estate market continues to dip and rise, new investors find themselves in a landscape where anything can happen at any time. Fortunately, some staples of real estate investment never change.
The first and most important lesson involves perspective. In this difficult climate, first-time investors likely have had bad early experiences that soured them on the market going forward. Negativity distracts them from staying motivated and focused. If you fail, adjust your strategy objectively rather than giving up on it.
Secondly, beware of methods of maximizing profits that can take a toll on your tenants. If you invest in commercial real estate, the success of the businesses that lease your property directly influences your profits. Avoid trying to squeeze every last dime out of a property or else your tenants will bolt as soon as their leases expire. Manage fairly and tantalize tenants with fabulous early renewal offers to keep them on your property.
Lastly, do not panic. A bad market causes inexperienced investors to rush into deals to sell. Ignore these knee-jerk reactions by analyzing the market, seeking advice from peers, and calling on your own judgment to either weather the storm or cut your losses.
About the Author
David Mendivil González has more than 15 years of experience in managing risk and developing new properties. He is the Director of Grupo Desarrollador del Noroeste, S.A. de C.V.