BIGGEST RISK with Zachary Beach 2024

Commercial Real Estate Pro Network

J Darrin Gross

And so if you're willing, I'd like to ask you, Zachary beach. What is the biggest risk?

Zachary Beach

Yeah, I'm glad you brought that like, it's interesting the way you walk through all that, because that's essentially what we're trying to do is minimize risk as much as possible. Warren Buffett always said that they all make all the best investors out there, not specifically real estate, look to minimize the downside and maximize the upside. And I think that's exactly what we've done here. We're creative financing. Because right when we buy a piece of real estate, we're not personally guaranteeing the debt. So we are not taking on the risk of the debt. It's actually on the seller, so we're actually pushing it back to the seller. And then what we're then doing is we're actually not taking on the full risk of the property either because when we go sell on rent, oh, we're actually pushing the risk now to the tenant buyer for handling any and all responsibilities of the property because it's tied to his option. So it's very interesting that you hear that. So our biggest risk when it comes to these two deals. One, if it was a subject to deal, the biggest risk always involves is the due on sale clause. So then how do you manage that do on sales cause risk? Well, you buy a product, we buy the property in a trust. And then because the Garn Saint Germain act of 1982 allows you to transfer ownership of a property for state or tax planning purposes. So we use that to try to manage the risk. And then there's lots of insurance companies nowadays. I actually have a due on sales calls insurance now, as well. So that's where we we certainly minimize that. So then what? So then if we look on the buyer side, what's our biggest, our biggest risk? Now our biggest risk is if our buyer defaults, on a on the on the option or the rent to own deal, which means that we gotta go to traditional tenant law, which means now we're gonna deal with an eviction. So when we look at that, those are going to be our biggest risks involved when we do our best to manage that tenant buyer risk by getting as big of a non refundable deposit as possible, because it's less likely they're going to default if they have more money involved in the deal.