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What Is Negative Leverage in Real Estate?
Real estate investors often use debt to finance their endeavors. This allows the investor to put up less money in acquiring a property. The use of debt by the investor is called leverage. Basically, the investor is granted buying power through a loan. It’s money the investor would not otherwise have.
What Is Capital Risk and How Do You Calculate It?
When deciding to invest funds into a risky (and hopefully high return) endeavor, one of the first decisions is how much money should be invested. It’s another way of asking how much money I want to lose if the venture goes south.
What Is the 2% Rule in Real Estate Investing?
Unlike some other famous maxims in real estate investing (like the seventy percent rule, for example), the two percent rule is widely discredited in most U.S. metropolitan areas. The rule holds that the rental amount should equal two percent of the property's purchase price. By that calculation, if you purchase a house for $100,000, the monthly rent should be $2,000. That seems unrealistic at first glance and becomes even less likely the deeper you dig in.
What Is Political Risk and How Can I Measure It?
At Realized Holdings, we write about risk on a frequent basis. There are all kinds of risks that impact investments, such as business risk, credit risk, general market risk, and systematic risk.
What Is Longevity Risk and How Can You Mitigate It?
Every so often, the media will announce that Americans are living longer than ever before. It’s true that recent headlines report shorter life spans because of COVID-19. But over the very long term (i.e., a 50-100 year big picture), people are living longer, thanks to improvements in medicines, medical technologies, and lifestyle choices.
How Are Bonds Affected by Inflation Risk?
If you’ve been paying attention to recent business and financial headlines recently, you know that we’re living in inflationary times. The Bureau of Labor Statistics releases a monthly Consumer Price Index (CPI), an indicator of inflation. The April 2022 numbers showed that the index increased by 8.5% from the year before. In other words, people are paying 8.5% more these days for baskets of consumer goods and services.
What Is Foreign Investment Risk?
When Russia invaded Ukraine on February 24, 2022, the United States, European Union, and other countries announced sanctions on Russia. These sanctions ranged from banning investments in and exports to Russia, sanctioning the Russian central bank and freezing assets of high-ranking political officials. This, in turn, drove Russia to impose its own economic sanctions and measures on foreign investors with assets and capital in the country. All of this, in conjunction with Russia’s shuttered stock market and the ruble’s collapse, has harmed foreign investors with exposure to Russian assets.
What is Concentration Risk and How Can You Mitigate It?
Putting all your eggs in one basket speaks to the essence of concentration risk.
What Is the 10% Rule in Real Estate Investing?
The 10% rule actually consists of three rules. They are meant to be a quick and minimal way for real estate investors to check that they’re making a good deal on a new investment. Having some simple-to-follow rules in your back pocket is always a good tactic to help eliminate potential bad deals early on and with little effort.
What Is Regulatory Risk and How Can I Mitigate It?
Changes in federal, state, or local regulations by governing bodies can negatively impact many sectors of business, financial securities, or the stock market. These changes could lead to higher costs of doing business, unfavorable tax environments, or even unhinge an industry’s entire business model.
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