Investing in Real Estate and Determining Your Appetite for Risk
Updated: Jun 17, 2021
As I’m sure you’ve noticed, the stock market has been pretty volatile lately. I’ve been working with investors looking at real estate as a means of putting their money in places other than the market—of the multiple approaches to this, some are looking to hold on to property for a long time and rent it out, some others are planning on making a quick flip with a quick profit. Regardless of how you decide to invest it’s important to be cognizant of what level of risk you’re willing to take on and for how long. Based on the whole picture of your finances, liabilities, lifestyle, and available time to appropriately manage your assets, what is your tolerance for risk?
If you’re looking for passive income, renting out a single-family or multi-family home may be a good option for you. However, it’s important to investigate what kind of profit you’re looking for. The first step is determining the Capitalization Rate (or Cap Rate) is the estimated rate of return on a property in which you’re interested as a potential investment. The higher risk, the higher your desired Cap Rate should be. If you plan on holding on to the property and are more focused on appreciation in value over a number of years for an eventual sale, then a potential goal could be merely to have the mortgage and expenses covered by rental income. Could your long-term goal be to acquire additional real estate investments leveraging the equity from other real estate in your portfolio? There are countless facets to real estate investing with equally countless upsides and downsides. That’s why it’s of utter importance to plan out your long game before getting started.
I work with investors to help figure out the big picture. Many clients are savvy and successful people who just need help getting a sense of the areas with the best potential, how the market is trending, or determining typical costs and rental rates to aid in calculating a fairly accurate Cap Rate. This is in conjunction with the obvious service I provide of navigating the multi-step process of buying and selling real estate. I’m a real estate expert who sees the market day-to-day and can guide investors with honest advice. Whether it’s your first time or your tenth time investing, I provide value in seeing the bigger picture so you can make an educated and ultimately profitable decision.