Rising interest rates are triggering a wave of unexpected capital calls from operators. In this episode, Whitney Sewell shares insider strategies for navigating this turbulent market.
Learn how expiring rate caps are straining deals, why open communication is key, and how to thoroughly evaluate any capital request before committing more funds. Sewell also offers tips for proactively managing risk through diversification and maintaining cash reserves.
Here are 3 simple takeaways from the show:
- Capital calls are often triggered by rising interest rates and expiring rate caps on floating-rate debt. This is putting pressure on many real estate deals that relied on initially lower variable rates.
- Investors must thoroughly evaluate any capital call request. They should understand the reasons behind it and ensure the operator's plan is sound before committing more funds. Open communication with the operator is also key.
- Investors can help manage risk from potential capital calls - by diversifying their portfolios, maintaining cash reserves, and conducting thorough due diligence on deals upfront. This includes understanding debt structures and risks.
Don't get caught off guard by your next capital call - tune in to get an experienced investor's take on asking the right questions and protecting your real estate portfolio from unforeseen expenses.
Timestamps:
01:25 Capital calls in the real estate market
03:00 Floating rate debt and expiring rate caps
06:59 Unexpected market conditions vs. potential mismanagement
08:15 Communication is crucial
09:04 Legal ramifications for capital stack
10:50 Make sure to have an emergency fund
11:40 Conducting thorough due diligence
12:24 Diversifying your investments
14:29 Educating yourself to be prepared
15:41 Ask questions and be proactive
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28 авг 2024
