According to Warren Buffett, there are only two rules of investing:
Rule #1: Never lose money.
Rule #2: Never forget Rule #1
While capital preservation is not the most exciting aspect of real estate syndication, it is the primary objective of any investment. Even if we don’t net the expected returns, we want to be sure we get our money back. In order to do that one focuses on mitigating risk and ensuring the Company is in a healthy position to handle the unexpected; say, a global health crisis, or drastic shift in the travel industry.
Real estate investment is inherently more stable than most other investments, as it’s not tied to traditional markets. Still, there are specific strategies we employ to be sure the Company has the best chance of preserving and growing our investor’s capital:
Adequate funding. Our operations don’t rely on cash-on-cash returns. Capital commitments cover every aspect of acquisition, renovations, and furnishing properties for use by our Investors. Committed dues maintain the properties and reserves. Rental incomes are earmarked to reimburse investors.
Diversify risk: By investing in multiple markets and in a variety of property types that serve a varied customer base, the portfolio’s exposure to any one detrimental variable is limited. The failure of any one property or season to meet expectations won’t affect the success of the Company as a whole.
Have multiple exit strategies. Our model anticipates holding the portfolio for about 10 years. As we have no way of knowing what the market will look like at that time, the Limited Partnership Agreement has a flexible window to find the best opportunity for maximum sales income. The Company also has multiple liquidation strategies: the Manager can sell properties individually, as a complete portfolio to other syndicators, private funds, or institutional buyers, or the General Partner may buy any or all properties at market rates to convert into a rental portfolio.
Put together an experienced team that values capital preservation. One of the most critical parts of our capital preservation strategy is having an experienced team that values capital preservation. The General Partner, operating company, and property management team all have that one common goal: preserve the assets. It’s what we’ve been doing for the wealthiest people in the world for decades and we have a strong track record of success.