Real estate investing and risk profile – are you familiar with yours?

Posted on 09. Dec, 2010 by in General

  Today I thought I would write about the importance of becoming aware of your risk profile and how it can greatly affect your success as a real estate investor.  I know from your feedback, that   many of you are starting to put plans and goals together to get a head start on 2011.  If one of your goals is to purchase an investment property and for one reson or another, this did not happen   in 2010, perhaps your risk profile has something to do with it.

Prior to purchasing your first investment property it is critical that you make become  familiar with your own risk profile. Start the ball rolling by asking yourself these three questions

How comfortable are you with taking risks?
How will you cope when interest rates go up or a tenant moves out your property?
Will you lose sleep over real estate values, debt, bills, or fear of the unknown?

Let me tell you some hard truths right now. If you invest in property;

  • There will come a time when the tenant doesn’t pay rent
  • There will come a time when interest rates go up
  • There will come a time when the tenant damages your property
  • There will come a time when you are not happy with your property manager
  • You will owe the bank money
  • You will need to trust that your property is being looked after without making daily visits
  • The unexpected and unknown will happen to you

If you think you’re unable to cope with any of these issues then maybe you need to look at what lies behind your discomfort. If you’re still not comfortable then it’s critical that you consider your risk profile when you are making strategic decisions. It’s important that you can sleep at night!

Real estate investing is a business, and like all businesses there is an element of risk. When you’re prepared to understand, deal with and potentially reduce the risk wherever possible,  then you are probably ready to be a successful real estate  investor. 

Here’s to your incredible success in 2011!

Jane

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