Investing in Debt During Market Uncertainty

February 7, 2023 at 2:45 pm PST

With a looming recession and the stock market in decline, investors may want to look beyond traditional markets and consider investing in alternatives such as real estate. Real estate investments continue to perform at historically high levels and respond favorably to inflationary pressure.

There are different forms of real estate investing each with varying degrees of risk. Through lending, investors can benefit from inflationary pressures without assuming the risks of direct equity investment. As the Fed increases interest rates to combat inflation, investment in real estate-based debt instruments becomes more attractive.

Private loans are generally secured by a deed of trust on collateral property. The lender can mitigate the risk associated with the loan by adjusting the amount of money advanced relative to the value of the collateral. This is the reason why investing in real estate debt can be less risky than direct equity investment. An owner of real estate will feel the full effects of any changes in value, while a lender’s exposure is limited to the size of their loan.

Allocating a part of your portfolio toward lending can help to limit your overall exposure during times of economic uncertainty. Investment in debt becomes a means of mitigating risk.

Risk management is the primary function of Romano Capital. An experienced lender and developer in the greater Portland metropolitan area, Romano designs investment funds to adjust to market conditions based upon current risk assessments.

“During an economic contraction, we generally invest more of our cash assets in debt. Purchasing at the top of the market is inherently risky, and lending provides an opportunity to manage that risk while remaining active in the market,” according to Kess Romano.

The economy will always experience uncertainty and volatility, which is why it’s important for investors to find an investment partner that puts their clients first. Romano Capital understands that its highest priority is protecting and preserving investor capital. Real estate debt investment is a proven way of achieving this goal.

*This article was first published in Greet Camas magazine February 2023 issue.