052 | FIRE State of the Union | Todd Tresidder | Risk Management

Real Estate Risks

Real estate investing presents unique challenges, primarily due to its illiquid nature and high transaction costs. Jonathan Mendosa explains that real estate's low volatility and high transaction costs make it optimal for long-term holding, but this also means risk management must be proactive, occurring upfront when structuring deals 1. He shares his experience during the housing bubble, where inflated property values and unqualified tenants signaled a credit bubble, prompting him to exit the market 2. Reflecting on his past, Jonathan advises his younger self to have invested more in real estate through a buy-and-hold strategy, emphasizing the importance of understanding tenant management and amortization 3.

   

Business & Paper Risks

Business and paper assets come with their own set of risks, requiring tailored strategies for effective management. Jonathan Mendosa highlights the importance of risk management in business, where careful planning can lead to profit even in failure, unlike paper assets that are limited by volatility 4. He predicts increased market volatility, emphasizing that successful investing involves placing capital at risk in an unknowable future, aligning with Todd Tresidder's philosophy of never losing money 5. Jonathan further explains that investment strategies should be tailored to individual circumstances, such as a lawyer investing in real estate for their practice or a teacher focusing on property renovations during summer breaks 6.