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What Are the Major Risks in Real Estate Investing?
Every investment has risk. Earning a return above the risk-free rate means taking risk. The analysis of risk is a big topic. But there are some real estate risks that we can identify as being much higher than other risks. This isn’t to play down lesser risks. But at least knowing where major investment risks lie can provide a quick risk mitigation checklist for potential investments.
What Is REIT Dividend Risk?
Many investors turn to real estate investment trusts (REITs) for portfolio diversification, dividend income, and potential long-term appreciation of their initial investment capital.
What Is Exchange Rate Risk?
All companies face various risks that can affect their business activities' financial and operational success. Some risks can be anticipated and potentially preempted or mitigated, while others may be unexpected and unavoidable. Investors should look for known, disclosed, and potential unknown risks when evaluating investment options. Some types of exposure are common to all businesses, some might be specific to a particular industry or operational structure, and others could be individual or rare. Let’s examine some of the risks many companies face.
What Is the Rule of 69 Percent In Real Estate Investing?
Investors love to employ rules to help them predict outcomes. For example, there is a one percent rule (a one percent increase in interest rates equates to ten percent less you can borrow to keep the same payment) and a two percent rule (the percentage of a home’s cost that you should be asking for in monthly rent) and more. Some of these rules can help estimate potential results, but others are outdated or possibly never really held much value.
What Is Over-Leverage in Real Estate?
Real estate investors often use leverage to help increase the performance of their returns. While this works well when property values are appreciating and operations are running smoothly, it can backfire when things aren’t going as well. This problem is exacerbated when an investor decides to over-leverage.
Why Do Short-Term Bonds Have More Investment Risk?
A 60/40 investment portfolio is a traditional allocation of equities and bonds. Meaning that 60% of the portfolio is invested in equities and 40% in bonds. This split is meant to counter peaks and troughs in equities. Periodic rebalancing is also needed to maintain the allocation.
What Is Unsystematic Risk?
Portfolio diversification is a risk management strategy that many investors follow. But what risks are investors trying to reduce through diversification? Some risks can’t be reduced, but that isn’t what diversification is after. Diversification helps manage unsystematic risk. In this article, we’ll go over what unsystematic risk is.
What Is the Due Diligence Period in Real Estate?
Whether you’re buying real estate for investment or to live in, you’re putting money into that property. A lot of money. You don’t want to inherit a seller’s problems when you buy.
What Is Downgrade Risk?
Downgrade risk affects both bond and equity investors. Different entities issue ratings for bonds and stocks. But the net effect of a downgrade is similar for both bonds and stocks. Investors who hold either of these investments are always exposed to downgrade risk. In this article, we’ll discuss what downgrade risk is.
Can Unsystematic Risk Be Reduced or Eliminated?
Unsystematic risk is the flip side of the two primary risks investors face. The other risk is called systematic risk. Understanding the difference between these two risks means understanding why some risks can’t be reduced/eliminated from a portfolio while other risks can.
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