Please ensure Javascript is enabled for purposes of website accessibility
Home / Columnists / INVESTORS’ CORNER: Maintain a margin for the unexpected

INVESTORS’ CORNER: Maintain a margin for the unexpected

The term “margin call” is generally associated with investments in commodities or stocks using leverage.  As the value of the investments rapidly declines, the brokerage house facilitating the borrowing for the investor asks for more collateral from the investor to cover the losses being sustained as the value of the asset declines.

I submit to you that all of us have “margin calls” irrespective of whether we are investors in the stock market, commodities or real estate. In fact, if we are an investor, business owner or in any way self-employed, we all experience margin calls. The problem is, some of us run our lives and schedules in a way that we have no margin.

A principle that I am relearning is that I need to leave a margin.

Whether it is buffer time in our schedules, an emergency fund in our bank accounts, or a “surprise” portion in our rehab budgets, I highly recommend that we all do our best to have the resources available when we get hit with a margin call because they will happen. Appointments will need to be rescheduled, traffic jams will suddenly materialize, tenants will bounce checks, and bad weather will hit. If you’re running your business or operating your investing in such a way that you have no margin for error or for the unexpected, the slightest thing can throw you off and put you into deep trouble. Planning on and budgeting for margin is challenging in this on-demand, instant-gratification world. Each of us needs a margin.

Here is something to consider. There are a number of organizations and institutions out there that actually profit from people’s inability to maintain margin. When you think about the amount of money banks collect in overdraft fees, credit card companies receive in late fees, lenders receive in penalties and late fees, and municipalities receive from parking tickets for expired meters, you begin to realize that there are entire industries and parts of our culture that are designed to profit from people’s inability to maintain margin.

Attorney Jeffrey S. Watson is council to the National Association of Real Estate Investors and an advisor to the Metrolina Real Estate Investors Association,, which provides education, networking, and mentoring to Investors in the Greater Charlotte area. You may contact Jeff at [email protected]

Leave a Reply

Your email address will not be published. Required fields are marked *