RCRE - Risks are Opportunities


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Dylan Marma and Mike Taravella discuss the risks when investing in a multifamily syndication:

  • Interest Rate Risk - This is the risk that as an investor you become less able or unable to cover your debt burden.
  • Liquidity Risk: Risk that the investment is not able to be sold at the planned time. This is amplified in the event of a high point in the market, or being in a distressed position in need of a "fire sale".
  • Funding Risk: The risk that the general partner falls short on their raise. This is common in the event of a fund when investors are required to invest via a capital call.
  • Concentration Risk: The risk of loss due to having all of your eggs in one basket or being overly concentrated in one asset/asset class.
  • Credit Risk: This applies largely to debt investments or to real estate investors dependent on tenants. You run the risk of having a poor quality tenant and/or having their credit drop during the holding period.
  • Inflation Risk: The risk of loss in purchasing power because the value of your investments does not keep up with inflation.
  • Horizon Risk: The risk that your investment horizon is shortened due to an unforeseen circumstance, such as a fallout of the partnership.
  • Political Risk: This is the risk that some level of political event/ordinance poses a threat on the operations or profitability of the business.
  • Currency Risk: Currency risk is the potential risk of loss from fluctuating foreign exchange rates
  • Operational Risk: The risk of loss as a result of inadequate processes and systems to support the organization.

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