Risk is the possibility of something bad happening. You don’t make enough return or you lose some or all of your investment.
Debt Does Not Equal Risk – We use financial leverage with real estate because lenders see it as a safe investment, and it accelerates the returns for the investor. But it also scares many investors away. Watch my #1 Thing That Stops You From Buying Real Estate video to help!
Here is the risk framework:
- What could happen? – The bad thing
- What is the cause?
- Are there any indicators?
- What is the probability of it happening?
- What is the impact if it does happen?
- What is the mitigation?
Watch as I use this frame to look at:
- What if Interest rates increase?
- What if I can’t rent?
- Unexpected repairs and costs
- What if I have problem tenants?
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