How to Assess and Embrace Risks in Real Estate Investments

Investors’ guide to understanding risk thresholds in real estate investing.

In this part of my investor series, I want to talk about your threshold for risk. Are you a puddle jumper, cautiously navigating small risks, or are you a cliff diver, ready to take on significant challenges? This is a crucial question to consider in real estate investing.

To emphasize my point, I’ll show you a property that I discussed in a previous video a couple of months ago. This investment property journey started when I made an offer on behalf of my investor client. Initially, the house needed only basic updates, which seemed manageable and aligned with our investment goals.

After our offer was accepted, we returned to the property and discovered a significant issue. A water system had malfunctioned, flooding the house for a couple of days. The damage was extensive, with water reaching up to 18 inches from the floor and affecting all the lumber and cabinets. This 1,700-square-foot house was essentially submerged under three inches of water.

“Understanding your risk threshold helps you narrow down your investment options, saving you time and money.”

My client’s risk threshold was tested when we discovered the flooding. Initially, they were cautious, but as the situation unfolded, their willingness to take on more risk increased. We negotiated for insurance money to cover the repairs before closing, but the investor still had to front some of the costs. This required a significant leap of faith.

Despite the challenges, the project turned out exceptionally well. The house now features brand-new cabinets, beautifully painted interiors, and high-quality countertops. The transformation is remarkable, and the property’s value has significantly increased from our initial offer.

This experience underscores the importance of understanding your risk threshold in real estate investing. My client’s willingness to take calculated risks paid off, resulting in a beautifully renovated property that’s worth much more than we initially anticipated.

Are you ready to explore real estate investing? What is your threshold for risk? Whether you’re a puddle jumper or a cliff diver, it’s essential to know where you stand. If you’re interested in getting into real estate investing, reach out to me today by calling 512-587-4050 or email [email protected]. I look forward to working with you!