How to Assess Your Risk Profile to Know Which Real Estate Niche is Right for You

How to Assess Your Risk Profile to Know Which Real Estate Niche is Right for You

3 min read
Drew Sygit

Drew is a classic overachiever, bringing intensity and passion to everything he does. While in the mortgage business, he rose to a VP position at the first broker he worked for and then started his own company.

In the pursuit of excellence, Drew obtained several mortgage designations and joined mortgage and several affiliate association boards. He also did WebX presentations and public speaking engagements. It was during this time, he started personally investing in single family rentals, leading him to start Royal Rose Property Management with two partners. He also joined the board of a local real estate investors association, eventually becoming its president.

The real estate crash led to an offer from the banking industry to manage a Michigan bank’s failed bank assets they acquired from the FDIC. The bank went on to eventually acquire four failed banks from the FDIC, increasing from $100MM in assets to over $2B while he was there. After that he took over as president of Royal Rose Property Management and speaks at national property management conventions.

Former board member of Michigan Mortgage Brokers Association, Financial Planners Association of Michigan & Mariners Inn (nonprofit)

Former taskforce Member of Michigan Association of CPAs (though not a CPA)

Involved in mortgage business for over 18 years, obtained mortgage designations: Certified Mortgage Planner, Certified Mortgage Consultant, & Certified Residential Mortgage Specialist

Board member of Real Estate Investors Association of Oakland; President since 2012

2009-2012 Shared-Loss Manager for Talmer Bank (now Chemical Bank) handling FDIC failed bank loan loss strategy, reporting, REO management, collections, & gap analysis

Started investing in real estate in 1996

President of Royal Rose Property Management since 2001

Drew received an MBA from Wayne State University, concentration in Finance & Marketing.


Read More

Every investment can be thought of in terms of a simple gamble: You’re going to put $X on the table and play a game, and you’re going to walk away with $Y. If $Y is greater than $X plus expenses, you win! If not, you lose.

In almost every form of media available to us, we see risk-takers being lauded as the “movers and shakers” of the world. People who achieve impossible ambitions, who stand up to overwhelming authority or power, or who survive insane circumstances through daring and skill — these are the people we’ve been taught to exalt.

But property investment isn’t a heroic endeavor, and this isn’t a movie: You’d better have a really solid understanding of risk before you get in on this game, because if you lose, it’s your own lunch (and that of your family) that you’re risking.

Risk is THE Factor

There’s a lot of literature out there talking about the factors that make up a successful property investor (or investment) — but far too many of those books (and seminars and websites) don’t ever really delve deeply into calculating risk. They just say “avoid these things,” as though a short list of no-nos will stand in for a complete risk analysis. Your personal tolerance for risk (or, as the case may be, intolerance of low reward) is THE single most important factor in any real estate investment.

Determining Your Risk Profile

A person’s risk profile is composed of four elements:

  • Risk Tolerance
  • Risk Appetite
  • Time Commitment
  • Monetary Goal

Related: An Easy, Slow, Low-Risk, & High-Reward Way to Buy Your First Investment Property

Risk tolerance varies from “none” (you can barely afford to invest in the first place, and a loss would directly affect your lifestyle) to “extreme” (you have enough disposable income that you have trouble deciding what to do with it). Most people fall around the “low” category — they could manage if they suddenly lost a few thousand dollars, but that’s about it. In general, you shouldn’t consider real estate as a viable form of investment unless your risk tolerance is at least on the upper edge of “medium.”

Risk appetite varies from “none” (you don’t find the prospect of risking money to be in any way exciting) to “YOLO” (you find nothing more engaging than not knowing that you’ll have food or a house at the end of the evening). Again, most people fall into the “low” category. Real estate investment can appeal to any flavor of risk appetite except “none.” If you want low risk, wait and watch until a complete no-brainer shows up, snap it up, and be done. If you want “YOLO” risk, buy everything and pray.

Time commitment varies from “single parent of three with a full time job” — I mean, “none” — to “bored gourdless.” This is where real estate investing can get really hairy. It’s totally viable for one person to single-handedly landlord for one house while they hold down a full-time job and raise kids. It’s totally viable for a person with literally nothing else to do to single-handedly manage five, maybe six houses — poorly. But if you want to do more than that — even just one house more than that — you absolutely need a property manager. If you want to be a full-time property manager (that is to say, you want to have time and energy to commit to studying the market and finding great properties to invest in), it’s almost impossible without a great property manager.

Monetary goal breaks down into two essential types: You either want to invest because you’re setting up a cash flow, or you want to invest because you’re setting up a nest egg. Both kinds of investment are equally important, and real estate investing can lend itself to either one when set up appropriately.

Related: 3 Ways to Deal With Real Estate Risk Without Letting it Paralyze You

If you’re interested in investing, then, you need to sit back and assess your risk profile, and you need to decide if you have:

  • Risk tolerance enough to put your entire investment down on the roll of a die. One you lose it all, five and six you win 170% back. If you’re not willing to commit to that level of risk, choose a more stable investment.
  • Risk appetite enough that you’ll be happy to have your money out there working for you rather than sitting safely at home growing and sleeping on your feet at night.
  • Time commitment enough to either do the job yourself, or invest the time and effort required to find a property manager you trust and can work with.

If you can do that, and you can research how to set up your investment to achieve your monetary goal as well, then welcome to the world of real estate investing! Pull up a chair, grab a drink, and wait for your turn with the dice.

Investors: How did you find the best real estate investment for your risk profile?

Let me know with a comment!

Every investment can be thought of in terms of a simple gamble: You’re going to put $X on the table and play a game, and you’re going to walk away […]