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How to Minimize Personal Risk in Real Estate Investing

Real Estate Investing
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Today's Article: "How to Minimize Personal Risk in Real Estate Investing"

 

Similar to keeping one’s emotions out of the equation, minimizing personal risk also has a lot to do with how you interact with a particular client. Sure, there is an asset protection side of minimizing your personal risk but that is the subject for another day. What I’m referring to here is the tendency for many new investors to try so hard to accommodate a distressed client that they end up compromising their own business in the process. Examples of how this could happen include:

  • Accepting less than ideal rents or deposits from tenants or buyers.
  • Agreeing to a higher purchase price to accommodate a client’s needs.
  • Agreeing to give a client funds to move or get back on their feet.
  • Agreeing to refinance a property to get a slightly better interest rate.
  • Agreeing to accept existing tenants from a motivated landlord and having to evict them yourself

I could go on and on and you might say to yourself ‘Why would I ever do these things?’ The answer is that there is no reason but yet it happens with some frequency all the same. How, you ask? It’s called emotion and it can happen in the so-called heat of battle. When a desperate seller’s situation and a strong desire to create a deal come together, sometimes that can lead you to bad decisions and these you most definitely want to avoid.

Key Point: Every time you write a check you are at risk.

My best suggestion is to approach each and every deal you do as if you have zero money or credit and therefore had to structure the deal accordingly to make it work. This forces you to think creatively and as a result, minimize personal risk.

Let me repeat myself in case you are not paying attention here because this is very important to the life, growth, and longevity of your business. APPROACH EVERY DEAL AS IF YOU HAVE ZERO MONEY OR CREDIT. Even though I gave you this great advice, I know that many of you will use your money and credit anyway. If you still don’t know how to invest in real estate without using your money or credit then contact one of my team members at http://www.brianevanssupport.com to get more information on coaching and I'll teach you how!

There’s nothing wrong with being compassionate and wanting to help someone out. Real estate investors on a regular basis exhibit compassion and most make good money in the process. Where it becomes a challenge is when your benevolence affects your business decisions. Don’t let the client’s problems become your problems. Business is business, you didn’t put a client in a bad situation, and it isn’t up to you to bail them out. There’s simply too much at stake to take on the burden of a client, especially when it impacts your business’s bottom line.

As I wrap up on investor skill sets, I hope you see a little bit of the philosophy behind how I look at this business. I don’t believe you have to do all of this yourself. I don’t believe you must have the best market knowledge to be successful. What I do believe is that the most successful investors out there are able to absorb the information presented to them, determine from it what they need to make quick decisions, and rely upon their team and resource network to help confirm the validity of every transaction they pursue.

Beyond the basic elements of making streamlined, yet informed decisions, successful real estate investing is about effective communication. How you communicate the basic merit of your business, the solutions you come up with, and the mutual benefit of the outcomes from your efforts is absolutely critical to your success. It is natural that you may not feel you possess all of the skills I’ve discussed last couple weeks. If so, then they should become a part of your educational process and goals for you to strive to achieve. Each and every one of you has the potential to be a great investor. Sometimes, all it takes is knowing where you need to focus your efforts and I hope my experience and sharing has been helpful in doing just that.

 
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