Key Takeaways
- Scenario planning develops 3-4 internally consistent economic futures (optimistic, base, pessimistic, stress).
- Model portfolio metrics (DSCR, LTV, NOI, cash-on-cash) under each scenario to discover vulnerabilities.
- Predetermined decision triggers overcome paralysis and bias during market transitions.
- Update scenarios quarterly and document them in a written investment policy statement.
- The goal is not prediction but preparation — ensuring the portfolio can survive multiple outcomes.
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Test Your Knowledge
1.How many distinct scenarios should a robust scenario planning exercise develop?
2.What makes economic scenarios internally consistent?
3.What is the purpose of decision triggers in scenario planning?