Key Takeaways
- Five risk categories: market, credit, interest rate, operational, and regulatory—each capable of independent damage.
- The risk framework: identify risks, assess probability and impact, implement mitigations, and monitor leading indicators.
- Stress test the portfolio against five scenarios: rent decline, vacancy spike, rate increase, CapEx shock, and moratorium.
- Properties failing stress tests (DSCR < 1.0×, depleted reserves) are risk concentrations requiring immediate action.
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Test Your Knowledge
1.What are the primary categories of portfolio risk in real estate?
2.What is the purpose of stress testing a real estate portfolio?
3.Which stress test scenario is most important for a heavily leveraged portfolio?