How to plan for the worst case scenario

This month’s newsletter highlights how we planned for the worst-case scenario two years ago when our investors partnered with us to acquire a 98-unit complex. We’d love to catch up so reach out with questions you might have after this short read.

There’s always a level of risk with real estate investments. How will the economy perform? What if things don’t go according to plan? How is the property set up for success? We accounted for these questions by examining three factors.

  • The Team
  • The Business Plan
  • The Market

The Team
Two years ago, we couldn’t predict what the real estate market and the economy would do. Heck, we can’t do it now. But we felt confident knowing that our business partners at White Haven Capital live within driving distance to the property and would manage the apartment full-time. Their residence in Phoenix, Arizona, allows our team to remain fully operational even during these travel-restricted times.

The Business Plan
Things are unpredictable. A two-week renovation takes four. A tenant loses their job and can’t make rent. We stress tested our plan to see how the apartment would perform in various scenarios. What if our rent projections are off? What if that happens and interest rates change? What if both those things happen and the exit cap rate changes? Stress testing is giving us, and our investors, peace of mind during these uncertain times.

The Market
Diversity of jobs, growing population, and rent affordability are a few signs that a city is set up to thrive and weather whatever happens in the next decade. Phoenix, Arizona, has these macroeconomics and more. We didn’t know the worst case scenario would be a complete halt to the global economy. But Phoenix’s diverse sectors including healthcare, tech, and education are helping its economic engine continue to move, even when other cities are completely shut down.

Thanks for reading.