Financial Risk
Financial risk encompasses all potential negative outcomes affecting investment returns, including market volatility, leverage effects, and operational uncertainties.
| Risk Category | Examples |
| Market risk | Price declines, oversupply, demand reduction |
| Liquidity risk | Inability to sell quickly at fair price |
| Interest rate risk | Rising rates increase debt costs |
| Currency risk | Exchange rate movements for foreign investors |
| Leverage risk | Magnified losses from debt |
| Operational risk | Vacancy, tenant default, rising expenses |
| Risk Mitigation Strategy | Approach |
| Diversification | Multiple properties, locations, types |
| Lower leverage | Reduce debt to equity ratio |
| Reserve funds | Maintain 6 to 12 months expenses |
| Fixed-rate debt | Lock in rates to avoid volatility |
| Due diligence | Thorough analysis before purchase |
| Professional management | Reduce operational mistakes |
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