Real estate investment is naturally risky, regardless of the assets you own and what method you choose to use. The secret to success in investing does not necessarily depend on the degree to which it involves risk but on how you do when faced with danger. Risky investors put everything they have to lose on the line, while prudent investors try to avoid being in a scenario where they risk losing everything.

What areas should you focus your efforts on reducing risk while gaining momentum? Here are the eight areas I’ve discovered most beneficial to investors in any venture phase. Let’s take a look.

ASK SIMPLE QUESTIONS

The best method to minimize risk from investing is to conduct an analysis of trouble for the home. Consider the following inquiries about your property.

Risk Factors You Need to Know Before Making a Real Estate Purchase

• Is the property ANYTHING other than a single-family residential/townhouse/condo property?
• Is the home manufactured or a mobile house?
• Will the property be occupied when the time of closing?
• Does the land belong to a rental home for vacation or another recreation property?
• Do you think the property has SIGNIFICANT mold problems (with the remediation cost exceeding $5k)?
• Have you noticed ANY fire destruction (with more than 5k)?
• Is the house less than 990 square feet?
• Are you expanding the footprint of your property, or are you adding new walls to the exterior?
• Does the home have any foundation, roof truss, or foundation issues (with the repair cost exceeding $5k)?

Layered Risk Factors You Should Consider

• Does the property lie within 100 miles of coastline or a flood plain that is high-risk?
• Have the premises been damaged or vandalized?
• Is the property located in an area that is notorious for crime?
• Are you in a neighborhood with high-rental rents?
• Are the typical days on the market for 120 or more days?
• Are you located near commercial structures, active railroad tracks, or an important street?
• Is more than one house boarded up in the neighborhood within a quarter mile?

These questions will help determine the overall risk of the deal. If you can answer “yes” to each of these questions, you might want to reconsider which is the best deal for your business.

DIVERSIFY YOUR PORTFOLIO WITH DIFFERENT TYPES OF INVESTMENTS

Diversifying your portfolio of investments is an excellent method to ensure that your company can sustain a steady stream of revenue that isn’t affected by market volatility. We strongly recommend that you begin your investment with wholesale deals. Wholesale is the least risky and excellent method to invest in real estate without spending a huge amount of cash.

You can then make a share of the profits from the wholesale deal to invest in a fix-and-flip property. If you’re ready to take on more, we advise you to begin to flip multiple properties simultaneously. It would also help to consider acquiring some rental properties that earn steady, regular income. Soon you’ll be a real estate tycoon with an extensive portfolio that will keep your company afloat regardless of the conditions.

INVEST IN REAL ESTATE ACROSS THE COUNTRY

When starting with fixes and flips, it’s an excellent decision to remain in the local area so that you’re fully involved in every flipping stage. It is possible to negotiate with sellers in person, monitor the rehab process, and do most advertising yourself in your local regions.

You can diversify your investments to other lucrative markets when you’re at ease and earning a steady income. If you expand your local area and gain experience, you can test new markets that could offer more lucrative returns than the ones you currently have. Investing in different regions also permits you to invest in states with smaller taxes or more favorable small-scale business programs like local grants to improve your neighborhood which lowers your costs and helps you earn a profit.

To give you an understanding of how many markets there are across the United States, here are the top five cities to fix and flip in 2021:

Can you make an average of 128.12 percent return on your investment in your city? If you’re not, consider expanding your business into the 2022-23 year and even beyond. However, make sure you take your time, as you’ll have to give up much of the control that helped you succeed before.

INVEST IN YOUR EDUCATION

It’s possible you thought you’d graduated from your education a while long ago, but there are better investment plans than continuing your education. For a better idea of the amount of money you’re putting to be wasted for not investing more in learning, consider how numbers are stacked for the top 400 wealthiest individuals living in the United States and the amount of education they’ve had:

We indeed have uber-rich people within the US who still need to earn their bachelor’s degrees, like Bill Gates and Mark Zuckerburg. But they’re the exception to the norm and should not be used as a reason not to learn more about all you can.

Be aware that I’m not suggesting going to night school to obtain an MBA. However, you should take the time to know more about anything that will make you an even better real investment. Learn the basics of plumbing or carpentry and try a few bookkeeping classes, learn about becoming a more effective business owner, join an REI-based network group, get an instructor, or do whatever you want! Don’t be a risk for your business by thinking you’re an expert, and learn the things you can to reduce the risk of operating in a dangerous industry.

NETWORK WITH EXPERIENCED INVESTOR

In this business doing it on your own is a futile venture. Many new investors believe they must stay away from their competition, but this differs from reality. From my experience, the real estate industry has among the most friendly and helpful entrepreneurs you can find. Leaving that source left unexplored increases the risk of your business exponentially.

The more knowledgeable competitors better understand the market than you do. They may have access to advise or suggestions about managing everything, such as zoning issues, who the fastest property inspector is, and the amount they usually cost.

Do you run into unsavory competitors who do not have your best interest in mind? Yeah, probably. However, I genuinely believe and have observed that those individuals are in the minority and do not stay long in the field. Instead of feeling overwhelmed by the other investors, make yourself more comfortable. Join an area-based networking group, contact people via email to organize a coffee meet-up, and join an online investment group. You’ll be amazed at the information you gain and how your expenses can be reduced dramatically!

Another suggestion is to give back as successful get. There’s plenty of stock available to satisfy everyone’s needs. Your reputation as a trustworthy and helpful investor will reap dividends. Give generously of your time and knowledge when a novice investor contacts you with hands that are clammy to request a referral or some assistance.

CREATE A CACHE OF SERVICE PROFESSIONALS

Have you ever wondered if contractors transport you? We’ve been there. Instead of constantly wondering whether you’ll be able to receive the work you’ve spent money on, begin building your own Rolodex (do anyone still make use of Rolodexes?) of service professionals who you can trust to provide you with quality work at a fair cost.

I usually list at least three pros for specific categories like plumbing, general contracting, inspection attorneys, and electrical. I like having three since I can have an alternative if my preferred choice is unavailable and a fallback should the first fallback be unavailable or ceases to exist (it is more frequent than you’d expect, believe me).

It’s taken me several years to establish this “stable” of talented folks, So don’t be afraid to feel that you’re at risk when you can only count only a couple of trusted professionals. Having a single resource you trust dramatically reduces your anxiety and helps you reduce the risk of hiring a newbie in the field.

STAY UP TO DATE WITH MARKET TREND

Have you figured out the simplest way to minimize real estate risk? Be aware of what’s to come. That’s it! How do you stay on top of what’s to come? You are attentive and take the time to keep up-to-date.
I’m not just talking about market volatility, though it’s the most important element you’ll have to keep an eye on. We’re also talking about technology and how it affects your customers’ requirements, including those who purchase your fix-and-flip or the new tenants, you’re trying to bring in. Are you aware of how vital clean, renewable energy is an appealing factor to Gen-Z and Millennials? It’s good to know that solar panel prices have fallen by 89% in value since 2010.

It’s the same when it comes to rental property. Your tenants will likely be skew towards the younger generation who only have a checking account for a few years, if not ever. How do you attract the younger generation to your rental property without any electronic payment method? How much more enticed to cooperate with you if there was something like Venmo?

The less likely you are to rely on current trends, the greater your chance of attracting clients who will appreciate the product you’re offering. Stay informed about the current trends in your region, how demographics are shifting (or not changing), and what small pieces of information can provide you with an advantage compared to other investment firms.

HOARD CASH AND BE BEST FRIENDS WITH YOUR LENDERS

Unable to access essential resources in the time you require them could quickly put you in difficult situations. Although you’ll need to invest money to earn profits, there’s no have to invest all the cash. Make sure you have a solid reserve for rainy days in your company so that if there’s an unexpected event that occurs, you’re cash-strapped and have to pay contractors or pay employees. You don’t have to be scrambling for cash.

Furthermore, maintaining an excellent relationship with your lender will help speed up processing and may even result in lower rates.

This doesn’t mean you have to send them a holiday card or anything else; staying in contact will always be a great option for building professional relationships.

Inform them of the successes you’ve enjoyed due to their loan or how they helped you in some way with your business. This will not only be a pleasure to receive testimonials from the past, but it’s also the perfect way to demonstrate that your business is doing well in the long run and you’re also a trustworthy customer to be able to.

So that if you require fast cash with a hard money loan, the lender will be at the top of their list instead of having to your name to find out who you are and what work they’ve already done in the past.

FINAL THOUGHT

These tips can help you to gain more knowledge about risk reduction and help you feel confident that you can put your best investment foot forward. Utilize one of these ideas to lower your risk and be well on the way to becoming an expert real estate property investor.

Investing in commercial real estate has always been considered a sound investment strategy, and with vairt real estate crowdfunding platform, this strategy is now accessible to a wider range of investors. Vairt offers investment opportunities with a minimum risk factor, which allows investors to diversify their portfolios and potentially reap significant returns. With vairt, investors can invest in properties with small amounts of capital, allowing them to spread their investments across multiple assets and minimize their overall investment risk. By leveraging the benefits of technology and the power of the crowd, vairt has revolutionized the commercial real estate investment landscape, making it easier and more accessible than ever before.