• Mitigation strategy: Choose investments managed by reputable and experienced firms. Review their track record and management strategies. In case of direct ownership, hire a skilled property management company. Be cost-conscious, but don’t skimp on quality. Liquidity concerns: Real estate is not as liquid as stocks or bonds, which can be challenging when funds are needed quickly. • Mitigation strategy: Maintain a diversified portfolio with some liquid assets. Consider real estate investment options with higher liquidity, like REITs, which trade like shares of stocks. Interest rate risk: Rising interest rates can decrease the value of real estate investments and increase the cost of borrowing, such as mortgages. • Mitigation strategy: Consider the impact of potential interest rate changes on your investment. Look for fixed- rate financing options when leveraging investments. Lack of control: As a passive investor, there’s limited control over investment decisions and day-to-day operations. • Mitigation strategy: Thoroughly vet investment prospects and managers. Choose investments that align with your goals and risk tolerance. Tax implications: Real estate investments can have complex tax considerations that may influence returns. • Mitigation strategy: Consult with a tax professional to understand your investments’ tax implications and strategize for better tax efficiency. Capital call risk: Some private real estate investments may require additional capital injections or capital calls. • Mitigation strategy: Understand the terms of the investment, and have reserves set aside for potential capital calls. Regulatory changes: Modifications in real estate laws and 86
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