How do you protect against downside risk? (Other than not being crazy with leverage)

[Justin Hughes]

Hi all, curious to learn what strategies y'all employ to protect yourselves for when prices drop.  I know it is inevitable and it really stings when you have a lot of leverage, but maybe there is a good strategy so you can still use good leverage?

[Chris Seveney]

@Justin Hughes

Our portfolio now consists primarily of mortgage notes. We focus on acquiring loans originated pre-2018 which protects on some downside risk pertaining to market correction as our loan to value is under 50%.

Leverage is of course the best method to avoid downside risk as well as a diverse portfolio.

Another is owning assets in a good location with good tenants, if prices go down do you care if you have someone paying the bills?

Having some cash set aside is the other way to reduce risk in case you need to use that cash, most people get in trouble not due to price correction but running out of cash and over leverage