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PROAPOD
®Real Estate Investment Softwarewww.proapod.com
8 Ways You Can Manage Real Estate Investment Risk 
 James R Kobzeff 
Real estate investors naively associated with get-rich-quick real estate schemes have often lostmoney on their real estate investments because they were not warned that risk magnifies with thereturns on highly leveraged real estate.Unfortunately, these mislead real estate investors lost touch with reality and expected the marketvalues of their properties to appreciate at such high rates that they barely cared how much they paid for the property or how it got financed.As far as the real investor was concerned, this was the grand scheme. That the investment propertycould get sold in a few years for twice the amount they paid for it.Of course, we know better than that. So here are eight ways you can legitimately manage the risk on your next real estate investment opportunity.
1. Don't expect appreciation.
When you need high rates of appreciation like 10 percent or more ayear to make your investment look attractive, you set yourself up for a big loss.
2. Beware of negative cash flows.
Unless your investment pays for itself through the income it produces, you're speculating, not investing. If that's what you want to do, fine, just recognize thatspeculating creates high risk.
3. Don't overextend yourself.
When you finance with a high loan-to-value ratio (high leverage) itusually means that you will make large mortgage payments relative to the amount of net incomethat a property brings in. This makes you vulnerable to negative cash flows, vacancies, higher-thanexpected expenses, or generous rent concessions to attract good tenants.
4. Avoid overpaying for a property.
Little or no down payment deals cause many real estateinvestors to buy overpriced properties. The old real estate investment adage "You make moneywhen you buy" should be memorized.
5. Look for bargain-priced properties.
You build a financial cushion into your deals when you pay less than market value. If you really purchase right, you'll have equity when you get the keys tothe property. Another adage, "Only buy on Monday what you can sell on Tuesday", should bememorized.
6. Buy properties that you can profitably improve.
Sweat equity is the best way to build wealthfast and reduce the risk of leverage. It's always a smart real estate investing technique when you
©2009 James R Kobzeff. All rights reserved.
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