Karen
Lee Bertiger
CRB, CRS, e-PRO, GRI, RECS
FLORIDA LIC. REAL ESTATE BROKER
ARIZONA LIC. REAL ESTATE BROKER
INVESTMENT/INCOME REAL ESTATE
SPECIALIST
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Toll Free: 1-888-768-4454
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Office:
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Palm City, FL 34990
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Barrington, IL 60011-1747
We Do Not Currently Have an Office
Location in Arizona
Investment Real Estate Brokerage & Asset
Management (Not Property Mgmt)
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National Association of Realtors®
2008 Code of Ethics
Celebrating 25+ Years Career Experience in Investment Real Estate in 2008 With
30+ Years As An Investor
©2003-2008 Karen Lee Bertiger. ALL RIGHTS RESERVED
WORLDWIDE.
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This web & its information is a
service to Karen Lee Bertiger's prospects, customers and clients. While designed
to provide accurate and authoritative information, it is not meant as a
substitute for your own CPA, professional tax advisor, or attorney. Investment
real estate tax planning depends on your individual facts and circumstances. You
should always consult with your own tax advisor to determine if the ideas and
techniques discussed here apply to your situation. It is
offered with the understanding that Karen Lee Bertiger is not engaged in
rendering legal, tax or accounting service. If legal advice or other
expert tax or accounting assistance is required, the opinion or the services of
a competent professional person in those disciplines should be sought. The
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Risk Analysis (Individual, Portfolio &
Structural) Using Monte Carlo Simulation and Decision Tree Analysis
Realize the
importance of quantifying risk when investing in real estate. Your "buy-in" to
prevailing sentiment
may affect the true amount of risk you are taking.
Do you have a basic understanding of how to
use statistical simulations to map your risks and probabilities?
Develop a risk analysis process within your
firm to determine what types of disaster preparation you may not
have known you needed. Risk analysis on the front end
of any investment means a better "handle" on your
disaster preparation and plans. Let me show you how the
analyses will benefit your operations. Determining the
risks your tenants are taking by doing business with
you must also be factored into your analysis since a
financial failure of an anchor tenant also affects your own risk
profile.
Statistical risk analysis is as important to
real portfolio management as a processor is to a computer. Without
such detailed analysis, your portfolio management
system is just another decorative way to organize your
projects.
Risk management analysis can lower your
investment failure rate and risk, thereby helping you achieve your
performance targets.
Become familiar with both major risk
assessment tools: Monte Carlo Risk analysis and Decision Tree analysis.
Risks must be quantified - investment
decision makers must draw their own lines between their Exclusion
Zones, where they deem it too risky to venture, and the
other slices of the investment spectrum where the
potential risks are manageable.
Don't use common sense informal risk
analysis as an excuse to avoid doing real risk analysis.
Set up a process to determine and track
risks. Gather experts to determine project/investment risks. Assign
researchers to uncover known risks. Divide risks into
two categories, local and global. Create a template for
each risk. The template should include a unique risk
number, a risk owner, potential costs (in dollars and other
terms), a probability of occurrence (a low-medium-high
scale will do), potential indications that the risk is
materializing, mitigation strategies, and a post-mortem
for noting if the risk factor actually happened. Value
consistency - if you do things in a consistent manner
and your numbers are off, at least they'll be off in a
consistent, and therefore flexible, manner.
Once you have a repository of risks, you can
get statistical. The Monte Carlo simulation technique was
developed in the 1940s for the Manhattan Project. The
theory is that if you roll a die (how it got its name)
100 times each number will come up approximately
one-sixth of the time. Roll the die 1000 times and the
distribution becomes even closer to one-sixth.
Once you determine a project/investment's
risk profile, you can build in extra resources where needed
(money and time, etc.) to mitigate risks on the highest
point of the probability curve. You can also run
sensitivity analyses using only one risk variable while
keeping the others fixed to determine what happens
when only one risk changes. You may determine the best
area to concentrate your resources based on
the potential impact of a particular risk. Rank each of
your investments from riskiest to safest. You can then
generate an "efficient frontier" -- a line that shows
the combination of investments that provide you the
highest benefit at a predetermined level of risk. An
efficient frontier helps you avoid unnecessary risk.
Someone has to determine which risks (dots)
to put on the die and how to weight the individual dots.
That's your job as investor -- canvass your experts, mine historical data,
do whatever you can to come
come up with possible outcomes for each risk and then estimate the
probability of that risk occurring.
I can show you a do-able method of creating your own risk "die" - call me.
I can also inform you concerning
the strengths and weaknesses of each risk analysis method.
My CRB designation is based on the McKinsey
7-S organizational effectiveness model. Remember that a
purely structural business process management style can
render your investments and your business
unable to deal with rapidly changing threats and
opportunities. If you are a publicly traded company, you
need to understand how to comply with the Sarbanes-Oxley
requirements without rendering your
business as non-competitive. There is absolutely no
doubt in my mind that the real estate industry
and real estate investment businesses are in the throes
of a rapidly changing paradigm.
Call me toll-free at 1-888-768-4454 or direct 772-631-1605 or fill out my online assistance form.
Commercial Investment
Quick Response Form
Because so many calls have been received asking if I have software that can be
used to perform this type of risk analysis, I am currently developing software,
templates and a training program that my clients and customers can use to quantify their true risks.
In addition, the financial/investment analysis software I utilize incorporates
Monte Carlo Simulation for quantifying financial results. You can also download
hazard risk assessment
software from FEMA. In the interim, I am available to consult with investors
and companies on an hourly, half-day, day or weekly rate to conduct strategic
risk assessments on-site with your employees. Please
contact me for more information.