Oh, Those Scary Unknowns in Real Estate Investing

by | BiggerPockets.com

fear of the unknowns of real estate investingI guess the scariest thing about investing is not knowing for sure. Many have written about the best ways to minimize risk and create a system whereby an investor has the best chance of succeeding and maximizing ROI, yet, there is always still risk.

Even the best planned investment can go sour. We can almost predict the market by analyzing trends, looking at demographics, buying right, using information gathered from valuable sources, yet, still there is risk. But risk is what creates the reward.

I don’t know of any investment with a high return without risk. The higher the risk the higher the reward — but, conversely, and this is the scary part, the greater the possible loss. An investor has to be prepared to lose. Managing risk is an important part of investing. Perhaps having a back-up plan, if this plan for this property doesn’t pan out, perhaps I can use the property for this, or, if this tenant fails I have investigated this possibility, or, if the building trend doesn’t carry forward in this area, I can sell the property for this use — each scenario will be different, but there should be an exit plan.

And there should be an acceptance of risk as the nature of investing. I have seen too many investors pass up good deals because they could never accept the risk. There has to be a point after all the rational planning has been completed where you go out on a limb. This is tough, especially in this market.

Yet, in this market there are good investment choices, because of the risk. Those who pull the trigger and guesstimate correctly will be rewarded handsomely, but many might lose. If there was no loss, everyone would invest.

This seems obvious, but I’m considering new investors, and I know how the excitement of investing can turn into stark fear once the realities of the possibility of losing sink in. So, I’m advising to get all that out of the way before you pump yourself up, and get advice — this is very important — get advice from someone with experience. It helps to work through the fear, on one hand, and on the other hand, it prepares you to know fully what to fear. Go in with your eyes open, your mind clear and your heart (stomach) strong.

Photo: Daniel Flower

About Author


  1. Keira Carter on

    The word risk is what the investment other name is. You cannot avoid it that is the nature of investing. But there are lots of good real estate sources that you can rely on. Ofcourse you will not invest in a real estate company or agency without knowing first their background.

  2. The post is spot on.
    I have found most investors when they walk in “just want to make money” and they do not realize that it can take any number of paths to get there. Speculating and holding. Fix and Flip. Purchase to Rent. Purchase to fix and rent increasing GRM. And How can we do this with an IRA or a 401k? I am sure there are others.
    With all these possibilities, isn’t it hard to get folks to focus on a single objective instead of the multiple options available. If you can get them focused allot of their un-sureness disappears.

  3. Thanks Keirs and Pete.

    yes, Peira, it pays to check when using a real estate company. Track records and results are important.

    Pete, yes, focus can remove a lot of the anxiety, allowing the investor to make make better decsions.

  4. So true, real estate can b e risky, the art and professional way to approach investing is to conduct as much due diligence as possible.

    This should not only include the state of the market you are investing in and predictions for the future but also the industry in general, as well as the history of the property and if it’s a buy to let the tenants. Also if it is off plan property as a lot of investment property is nowadays you must look at the experience and history of the builder and property developer. I.e. have they completed successful real estate projects in the past on time and within budget?

    In short, do as much research as possible and consult professional help from advisers other investors and of course legal advice. Never sign a contract to purchase with out knowing all the facts first.

  5. Investing in real estate is a dual edged sword right now. The economy is a bit shaky, but real estate prices are at an all-time low for the past 7 years. At least in the US, where there have been foreclosures galore.

    I recently saw a feature about this on Larry King with Trump and a bunch of other panelists, all were pretty much saying that if you had cash or good credit…now is the time to buy.

    Personally I’d rather invest passively in an REIT or Mortgage Investment Corporation. Less risky in my opinion.

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here