Mitigating Risk for Your Investors

How do you assure your real estate investors that their investment will be preserved no matter what happens to you? How do you mitigate the risks associated with your equity investors lending money to your real estate venture?

Key Man Life Insurance. Right, that’s preservation of capital speaking. That’s the control and low risk that investors need to assure them that if anything happens to me, as the managing member of the investment, then the operating agreement for my LLC is instructed to pay off the debt. So my investors are covered.

Of course the managing member or the syndicator is getting casualty insurance as well. If the property burns down, casualty insurance will build it back again. The investment is covered and that risk has been mitigated as well.

Business Income Loss Insurance. If the property were to burn down the bank’s still expecting payments and so is the investor. So business income loss insurance will pay for the lost rent while the property is being rebuilt or rehabbed.

And of course you’re collateralized, your investors have a lien against the property. This is how investors retain control. If  the borrower does not perform, the investors can exercise the remedies identified in the lien and seek control of the property.

And because a savvy real estate entrepreneur has bought the property below market value there’s extra equity protection.

And that’s the example of control and low risk you can offer for your investors. It is that simple to build confidence in you as a real estate professional, so that investing their funds becomes a no-brainer.

Happy Investing!


Today's blog courtesy of Lance Edwards & First Cornerston Group, LLC

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