Description

In this episode, Shane and Stephen discuss the three elements of risk when it comes to commercial real estate: uncertainty, loss, and time. They point out that often investors have unrealistic expectations about the level of risk they're willing to take on, and that preconstruction deals are particularly risky. Listen in for some advice on how to assess risk and establish a comfort level before investing in commercial real estate

[00:01 - 04:36] Analyzing Real Estate Opportunities Safely and Make Good Decisions

• Risk in commercial real estate
• • Risk is relative and there are different levels of risk that different investors may be comfortable with.
  • Breaking down a framework for analyzing deals and discussing how this can be applied to commercial real estate deals.

[04:37 - 16:34]  3 Things to Consider When Evaluating Risk in Commercial Real Estate

• Risk tolerance and risk management
• • Commercial real estate deals can be riskier than smaller-scale deals. Risk management can help mitigate potential losses. 
  • Understand risk in terms of uncertainty, loss, and time.
• Determining your risk tolerance
• • It is important to have a good understanding of your risk tolerance before getting involved in a commercial real estate deal.
  • Different types of risks require different strategies when managing them.
  • Risk assessment is important, and it is important to have a team of experts to help with the assessment. It is also important to understand the local market and the competition.

[16:35 - 28:51]  Risk Assessment: Tips for Managing Uncertainty

• Addressing and mitigating risks in a business deal
• • There are four possible actions that can be taken in response to these risks: transferring them, accepting them, mitigating them, or avoiding them.
  • Risks can be mitigated by setting money aside in advance, transferring risk, or avoiding it altogether. 
• Risk assessment
• • Risk tolerance and comfort zone are important factors to consider when assessing risks. Risk assessment can be broken down into probability and impact.

[28:52 - 30:08] Closing Segment

If you are interested in my coaching and consulting program, please reach out to me through email at  shane@shanemelanson.com. I want to make sure to cater to those interested, so please use the word "coaching" on the body or subject line.

Connect with Stephen: https://ca.linkedin.com/in/stephenrsimpson

You can also follow me on Linkedin, and Twitter. If you would like to go even deeper into the world of commercial real estate, head over to Shane Melanson, a roadmap to investing in commercial real estate! Get my book Club Syndication - How The Wealthy Invest Their Money.

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Tweetable Quote:

"It's not about avoiding risk. It's about getting a handle on it, getting ahead of it. And going into our deals and our projects with our eyes wide open. " - Stephen Simpson