Risk Mitigation

As a long-time real estate practitioner, I’ve learned a few things over the years. If I can help just one person by sharing ideas and lessons learned, then this format will be worthwhile. Some have resulted from the joy of success, while others were learned the hard way. I promise to be transparent and not hold back. Sharing is how I choose to start my week.

May 4, 2026

Risk Mitigation

As a follow up to my article last week, “Why We Underwrite Conservatively” Risk Mitigation is the way we remove some of the possibility of loss from a project. I’ve been doing this for over 45 years, and I’ve had the pleasure of working with quite a few investors. What I’ve found is most of my clients have a few questions for me - what are the risks, what are the returns and what are the timelines? Removing as much risk from the project up front makes them feel more comfortable investing with us. You see, I invest alongside my limited partners in every project. This means our incentives are truly aligned—same exposure, same terms, same commitment. This produces disciplined decision-making and long-term relationships where everyone wins together.

Here is a Case Study where we mitigated a lot of the risk out of the project:

RailRoad Lofts, a 351-unit ground up multifamily project in Cleburne, Texas.

1. Location - I sometimes look at over 100 properties to find one that checks all the boxes. The land should both be in the pathway of progress to ensure future growth but also priced at a point that supports the financial feasibility of the project. The land for this project is located along one of the next growth corridors in the DFW Metroplex. It is at the end of the new Chisholm Trail Parkway which cut the commute time from the Fort Worth CBD in half. It has a great story, being located next to the Cleburne Railroaders baseball stadium and part of the first master planned mixed-use development in the area. Residents will be able to walk to restaurants, retail shopping and entertainment venues. It is also within walking distance of one of the country’s largest Amazon Operations centers scheduled to open later this year.

2. Entitlements – As part of the Railhead master-planned development, the zoning was already in place to build apartments. This is sometimes a challenge. We were also able to buy the property for less than appraised value, which gives our investors a built-in equity position. During the due diligence period we designed the project and received the building permits to start construction upon closing our development loan.

3. Financing – We have already closed on a HUD 221(d)(4) loan. This is the most coveted loan type a developer can receive. Very few approvals are awarded due to the intensive application process and the strict HUD underwriting criteria. What makes this loan type so desired is the built-in interest only construction period combined with a 40-year amortized fixed interest rate permanent loan. This removes all interest rate risk for the project. The loan is also assumable bringing value to a future buyer and helping with the exit strategy.

4. Market – As part of the HUD loan process several third-party reports are required. One of them is an in-depth market study. This report shows that the demand for apartments at our price point will exceed supply through our hold period over the next three years. The proximity to the new Amazon Operations Center also contributes to the strong demand.

5. Execution – If you read my recent article “Real Estate is a Team Sport” you understand why having competent operators in each given area of discipline is important. I have been fortunate to attract some of the most talented industry professionals that will execute this project at a high level.

At Founders Development Company we work to eliminate as much risk out of our projects as possible. Because of the time involved in a ground-up project there will always be a certain amount of risk due to not being able to predict future economic conditions. That’s why development projects offer higher returns than most investments.

The more risk you can remove from a project up front the better your chance of success. We also utilize a structured, disciplined system for resilient execution to adapt intelligently to whatever challenges our business plan. Adjust, adapt, and finish strong. That’s what produces durable returns over different market cycles.

If you have any questions or want to invest in RailRoad Lofts, please reach out to me.