How to Minimize Political Risk in Your Investment Strategy

I can’t stress this enough.

If there’s one hobby that will pay you major dividends, it’s hitting your history books.

You might think that history is boring (personally, I don’t blame you since most history teachers will put you to sleep).

But it’s important for understanding the environment around you.

For the investor in income properties, this is critical for your success.

Sound investing relies on persistent and historical trends.

Part of these trends unfortunately involves studying politics.

Indeed, politics is nasty, but understanding really basic aspects of it can save you a whole lot of headaches when you get into the real estate game.

So, let’s shift our focus down south and go back a few decades.

1980s Nicaragua was a turbulent place.

Under the leadership of the left-wing strongman Daniel Ortega (1979-1990), Nicaragua was mired in all sorts of unrest.

Naturally, people took to the streets to complain about Ortega’s authoritarian government and its economic policies that made the country economically unstable.

But it wasn’t just protestors against the regime present.

Pro-Ortega regime agitators (Turbas) joined the fray.

The Turbas were notorious for their violent actions against peaceful protestors.

They functioned as de facto shock troops for the Ortega regime and made sure to violently disrupt any peaceful protests his regime.

Despite these unsavory characters’ violent behavior, Ortega paid them back in kind by not arresting, let alone prosecuting them.

The Turbas were instrumental in keeping Ortega in power until 1990, when Ortega was finally defeated by Violeta Chamorro in that year’s presidential election.

Nicaragua’s case was not unique, however.

Going further down south to Venezuela gives us another case of the state allowing violent agitators to wreak havoc on normal people.

For example, the colectivos (collectives) have been instrumental in propping up the authoritarian governments of the late Hugo Chavez and Nicolas Maduro.

These armed, non-state groups carried out a similar function to the Turbas but with much more violent methods.

The colectivos effectively serve as a paramilitary group and have largely contributed to the unprecedented level of instability that you see about Venezuela on the news.

Although the above scenarios are much more extreme, they may feel familiar to Americans lately.

If you recall, major unrest swept across major American cities throughout 2020.

Many local elected officials allowed for unruly mobs to loot, vandalize, and even burn down private property.

In extreme cases, law enforcement was instructed to stand down as cities burned.

The social unrest coupled with the harsh COVID-19 lockdowns prompted millions of Americans to reconsider their present living arrangements.

As a result, there’s been a massive migration of people living in so-called “Blue States” in the coastal areas to the “Red States” in the Sun Belt.

Forget about partisan bickering, let’s look at patterns.

Like the diversity of housing markets in America, there’s a diversity of political jurisdictions that people can consider when things get out of hand.

There are not only differences in the parties in charge of a given state, county, or city, but there are also differences in the types of public policies implemented in these jurisdictions.

Here’s the thing, the areas where there was the lax policing against rioting in 2020, are also not the most landlord friendly areas.

The majority of urban centers are not very friendly towards small-to medium-sized businesses and individual investors.

You should keep that in mind when investing.

As a real estate investor, understanding the policy environment around you is critical to your success.

Allow me to be clear, this is not a call for political activism.

To the contrary, there’s only so much you can do to impact politics.

Sure, you can vote and potentially petition politicians, but there are limits to the kind of impact you’ll have.

Nevertheless, savvy income property investors should factor in the political risk of doing business in a particular jurisdiction.

Often, the information real estate investors gather on city or state policy tells them these places are not worth investing in.

You don’t need to be spending hours scouring political blogs or having your eyes glued to CNN, Fox News, or MSNBC programming to find this information out.

It’s as simple as doing basic legislative research when it comes to the laws and regulations with regards to house construction, landlord-tenant relations, and the landlord’s freedom to raise rents.

At the Empowered Investor Mastermind, we have plenty of experts who understand the local political environment of America’s diverse housing markets.

They will help you navigate the regulatory maze that many real investors must traverse daily.

Doing this homework before making a real estate move could be the difference between you finding a sweet deal in a reliable linear market…

…Or having to put with a nightmare scenario because of a strained relationship with a bad tenant.

Believe me, there are plenty of horror stories of landlords struggling to evict deadbeat tenants in states and cities with excessively pro-tenant laws.

You can avoid this and other headaches by letting our experts and experienced members guide you along the way.

They’ve been there and done it.

A good portion of them have learned that certain jurisdictions are just toxic no-go zones for income property investors.

So, they’ll make sure that you don’t make the same mistakes they did.

Anyway, as a matter of principle I don’t care for everyday politics.

And neither do most members of the Empowered Investor community.

But do pay attention to the legislative intricacies of the housing markets you’re looking at investing in.

For all you know, you could be walking into a nasty landlord-tenant relationship that could have been avoided by doing your homework.

So always do your homework before investing.

For more information on how to reduce your political risk when investing, go here: