BIGGEST RISK with Kip Sowden

J Darrin Gross

If you're willing, I'd like to ask you, Kip Sowden, what is the BIGGEST RISK? 

 

Kip Sowden

Yeah, I think that, you know, with every investment opportunity, there's risk and reward, right? And so we're always looking for, you know, ways that we can, you know, mitigate risk and generate, you know, outsized returns given the risk profile. And I think there's a lot of that's done through, you know, our vertical integration, as we discussed earlier. And I think a lot of it's done through, you know, on the commercial real estate side, it's done through the asset classes that you're in and the locations that you're in. I mean, if you're buying and developing in markets where demand is exceeding supply, you certainly lower that risk and you create theoretically better positive returns, right? And so it really boils down to, you know, the sponsor doing their diligence on the underwriting, you know. 

 

But there are you know, things that you don't count on or don't foresee, and how do you deal with those you know you mentioned, and being in the insurance business, I mean, you know, as well as I do, insurance is at an all time high for all, you know, product, you know, type, and it's something we've got to deal with every day. I doubt there's any sponsor that underwrote both taxes and insurance on the on their P and L's to the levels that they are today. And can you offset that on the revenue side, you know, you've got to be in the right asset classes. You've got to be in the right markets, and you've got to have, you know, room in your underwriting to account for the unaccounted, you know, for the unexpected, I should say. And I think that Rreef does do that. 

 

Well, you know, when we have things that we didn't underwrite. I want to make sure that, you know, well, we're not throwing off a 15, you know, cash on cash return. We're throwing off an eight, you know, which is still good, you know. And you have those kind of misses. We're also, you know, we don't have to sell. I mean, we're not a fund that has timeline, so we're going to sell and buy when it makes sense to sell and buy. And, you know, I think all of those things help mitigate the risk as people look at investing in, you know, commercial real estate, insurance and taxes, you know, higher than they've ever been.

 

Yeah.

 

And I think they're very, very important. You gotta have them.

https://rreaf.com/

Email: kip@rreaf.com