Commercial Real Estate Pro Network

J Darrin Gross

I'd like to ask you, Maxwell, Wu, what is the BIGGEST RISK?

Maxwell Wu  

I think the BIGGEST RISK, you know, right now in this market It is price fluctuation, right? investors do not like uncertainty. It's almost like a natural thing that the universe wants some order there. And we don't have a threshold to go off of a baseline they go off of it's very hard to see what the future looks like. What do all those words mean? Right? You know, again, you mentioned insurance. And I think a lot of investors, and I'm sure a lot of your listeners have noticed insurance costs skyrocket 3050 100%, of what it was previously. And that's for a multitude of reasons that, you know, we can drone on about, and maybe that's something you're able to add in here. But besides in middle class materials, labor, unexpected, you know, natural events, natural disasters happening. These are all things where, you know, folks didn't think there'd be such a destructive hailstorm in Texas, right. You know, these are things that truly anomalies, black swan events. Again, market does not like uncertainty. But how do you buttress against that against these headwinds? It's you got to Proform it appropriately and do that scenario analysis. And whether we do that for line item expenses, or really on a more macro basis, what happens if interest rates go up another 50 bibs? 100, VIBs 150 bibs, what to do to the property, right? So, sensitizing is a is a great way that we see the kind of hedge against risk or rather go in eyes wide open and say, if this does happen, what's the result? What can we do, right? To your point, what is preventable weather things that you can transfer risk on. So that's, that's how we view risk. And that's how we assess it. And that's how we had it. But in terms of, again, answering your question, what do we think the biggest risk is, is, you know, the highest levels of uncertainty, right. But if you want to be more specific with regard to real estate insurance is is is certainly out there. And making sure that you have the right folks that has seen have seen, you know, where policies were previously in the high inflationary times. And in times of stress, or for limited credit supply, look, or liquidity in the market, right? All these things inform premiums and cost of really insuring these properties, which any lender you go to any good lender you go to is going to require that you have a very strong insurance policy on the property.