How do I reduce the risk of real estate investment? Alli Parkinson
There are several ways you can lessen the risks of real estate investment.
Having solid numbers is huge in lowering the risk of a deal. The more data you have, the more certain you can be about the information you are seeing. Having solid data on how much the ARV of a property will be, and making sure you have a reliable contractor and a firm and thorough bid will also help reduce risk. Most importantly, knowing how those numbers fit together will help ensure you know which deals make financial sense to move forward on (The Advanced Deal Analysis is great for this!).
Finding a deal that will not require cash-to-close will mitigate your financial risk. Wholesaling the property completely removes the financial risk factor as you are no longer involved with the property once you've found a buyer.
Using contracts that are worded in a way that protects you is also something that will reduce risk. Having a due diligence period is key here to make sure you can back out of the contract if the deal doesn't make sense! Contracts with contactors and others working on the property is another way to reduce risk.
Avoiding properties with risk factors is also something that will help reduce the risk you're taking.
Having insurance on the property is also a very important way to reduce risk.
Another fantastic way to reduce risk to to create an LLC to be the owner of the property. It insulates you from having issues with the property, and shields you from personal liability.
Check out our YouTube video: How To Reduce Risk in Real Estate Investing
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