The commercial real estate collapse in the United States, the housing crisis, and the stock market collapse at the onset of the recession changed Americans view of wealth building and protection. The nation's mood moved toward debt reduction, wealth protection, and away from conspicuous consumption. These changes effect goals of many in the real estate market. Which leads us back to our title - Big Payoff With Minimum Risk - Investing in Real Estate. Perhaps the assumption that investors are after a "Big Payoff" no longer reflects the prevailing view. Instead investors now look first to preserve and protect the capital they invest and then to pursue reasonable returns with the potential of a stronger long term result.

What does this imply for developers and principals creating portfolios for investors?

First, protect the equity implies avoiding financing positions presenting the potential loss of an entire asset. Second, positioning project such that should issues develop alternatives exist to recover and achieve a reasonable result. Next, selecting projects whose nature provides protection against asset loss.

In the case of the first, principals should lock in longer loan terms with options to extend. Next, loans based conservative leverage offer protection for the assets they support. Finally, established reserve levels to either service a loan should performance weaken or to buy down the loan should value shifts demand are considerations that can protect the asset value.

As a further consideration, principals and investors should look at the partners in the project considering their capacity to protect the asset should factors develop requiring additional capital and lending access. If the investors are not strong enough, the project could suffer unnecessarily risking invested capital.

Having taken the above defensive steps, principals should be focusing on project fundamentals that further bolster these points and position the gains investors would like to see over long term. Investments factors that standout from this perspective include items like properties on large transportation arteries and that are seeing continued traffic growth. Also, projects that offer excellent visibility to traffic are a plus. Next, considerations like access to employment, local entertainment alternatives, development of shopping and restaurants, and surrounding schools and other economic factors. A property offering these items in a perennially positive area provide the long term lift to assure a good result over the longer course of time.

Principals and investors should be seeking many if not all of these factors as they develop plans that offer the right combination of factors to protect their capital going in and support their capital growth goals over time.