BIGGEST RISK with Todd Pigott

Commercial Real Estate Pro Network

J Darrin Gross

I'd like to ask you, Todd Piggott, what is the BIGGEST RISK?

Todd Pigott

In my opinion, and I evaluate that all the time, what's our biggest risk? I manage $100 million. Right now other people's money throughout our fund, what's the risk that I'm trying to avoid? I can predict the interest rates, I can look at the metrics provided by the GSA for portfolio performance and assess risk there. I can look at absorption rates and assess risk there. I can look at the borrower got good cash down, got good credit backgrounds clean, I can assess risk. They're my biggest concern of risk, and what I do every single day. And I think if there's any time for this to happen, it's it's now my biggest risk that I view as a potential threat to my specific platform, is a calamity outside of housing that will cause housing or real estate to collapse. I believe that housing today is extremely safe. We have 1.8 months of inventory. We have construction. We don't have a wave of foreclosures. We have a shortage of housing and all these point to stability right now except for little pockets here and there down 5% You know you 99% of list prices and my biggest concern. My biggest concern is a calamity outside of housing that will quickly affect housing, a terror attack political dysfunction, a drop in our currency war, war war. You know, everybody can call me a crazy for these things. But I believe that in 2023 The chances of some type of calamity occurring outside of housing or real estate that will affect housing or real estate is as likely. And I think that we're, we're, we're seeing some of that we're seeing things happen politically, society, currency, or even even globally, we're seeing things happen that we've never seen in our lifetime. And so I think if one of those events occurs, that would send housing into an into a spiral. And so that is, here's how I look at this, though, that is something that I don't have control over. I don't know what's gonna happen there. And if it does happen, I tell my investors this, our worst scenario is that we have a classic event outside of housing, that causes a deep decline in asset values across the nation, both in stocks and everything else. So what do we do? I tell them this, at least I've got real estate, I've got a home with a first position lien, we're a borrower with good credit, put down 20%, I can get in my pickup truck, and drive to that property. And we at least have that. So we, he bought it for 400, he put down 60 to 80, we're into it 320, we thought it was gonna be worth 550 and the whole world fell apart. At least we can get in our pickup truck and drive to that property. And I've got a property that somebody has to live in, we will freeze the fund, freeze it. And we will be renting those or holding those for cash flow as as entry level housing until that calamity starts to dissipate. So my investors are coming. So what's the what's the worst thing that can happen? The worst thing that can happen is a calamity outside of housing. At that time, we would at least freeze the fund. And we would at least have assets that we would stabilize with renters for positive cash flow until that calamity dissipates. So that's how I plan on mitigating that that risk threat. And I think that risk threat is potentially real, potentially real, something out there is going to happen five years, 10 years, three years, I don't know it's going to cause a discourse and affect us. I don't have control over that. You don't have control over that. But the best way to protect about that is at least have some type of plan B or extra strategy and we do.