Every year California seems to be hit with yet another record breaking wildfire season. It is just a part of living in and owning property in much of the Golden State.
As these disasters escalate in frequency, volume and severity, it often seems to be a case of not if you’ll be impacted, but just when and how badly.
The big question for real estate investors is, how do you protect your real estate assets and portfolio performance in the face of this growing threat?
Choose Where You Invest Wisely
Almost everywhere on the planet is prone to some form of disaster risk. Parts of California may be more prone than others. It is worth taking this into consideration during due diligence and when evaluating potential deals. Then balance your evaluation on risk adjusted returns.
Through partnerships, syndications and financing leverage real estate investors can minimize and share risk. It means putting less of your personal capital and portfolio at stake and exposure in one asset.
By utilizing various forms of leverage investors can then spread their capital and holdings over a broader range of assets.
You can do this geographically to minimize risk at any one time, as well as in the number of units you have.
It is unlikely that your portfolio is going to be simultaneously hit with a hurricane, wildfire, tornado, flood, and terror attack.
This not only protects your capital, but your liquidity potential and consistency of income as well.
Insurance, Insurance, Insurance
No one loves insurance until disaster strikes and they get a payout.
It is one of those necessities of life, business and investing. Be sure to regularly review coverages, optimize coverage amounts and deductibles, automate premium payments, and keep good records.
Have A Plan In Place, In Advance
The most important part of protecting yourself is to have a plan in place well in advance of the need. Otherwise you’ll be scrambling, stressed out, and coming up short on resources, and challenged in making the best decisions.
Have a plan in place to prepare and minimize impact risk, to prepare in the face of a fire or other likely disasters, and to get in, assess and secure damage, and document it for claims afterwards.
Unfortunately, wildfires appear to be an increasingly common part of life and real estate ownership in parts of California. Fortunately, there is a lot that investors can do to minimize their risk, and optimize for the upside across their investment portfolios too. The time to take these actions is now.