BIGGEST RISK with Chris Zona

J Darrin Gross

 I'd like to ask you, Chris Zona, what is the BIGGEST RISK?

Chris Zona

Sure. So I think it really fits within what we're talking about. I think the biggest risk for investors that are in this this realm is that you need to be comfortable with taking over a potential non performing note, right? Like there is no way to avoid risk when you're making this sort of play. So what you need to do is kind of, you know, balance minimizing the risk through your diligence process, because you don't want to take on something that you're not ready to you don't want to overextend in taking it on, and then kind of balance that with the, you know, maximize your return on whatever risk, wherever in the risk matrix that you fall right, they always say higher risk, higher returns. Was very true. You know, if you're going to buy a very, very non performing loan, you're going to be, you know, probably up on the tier of of the extension of capital, and you need to mitigate whatever risk, make sure that you have a cap stack in place to do that you don't want to take on additional debt in order to kind of engage in that strategy, because now you're becoming another note holder as well as being the Enforcer.

And then make sure that on the back end, that you're prepared for whatever the downside of your investment is, and that your investors, if you're running a management that you're openly communicating with them, timeline and the potential downfall, as you've said, there's the nice thing about this strategy is, if you're not a very, very specific strategy fund or investor, you can minimize the downside by how you enter and what your exit looks like. If you're flexible in what your exit looks like, then this could be a very attractive strategy, because you know, if you don't need to exit the property and return your to your investors capital within a short period of time, then maybe you can stay in that property longer, hopeful, hope that the note holder turns it around.

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