Risk Factors Associated With Multi-Family Real Estate

When you’re assessing return it’s important to look at its association with any risk that’s involved. Expert investors are always calculating risk vs return. Weighing risk and return is important because we want high returns, and we want to reach our investing goals.

There are a few different asset classes such as stocks, mutual funds, single family homes and multifamily properties. Let’s look at each of these and see what the risks are and why we love multifamily real estate the most.

The least risky investment is a bond. It’s true. It’s because bonds are secure and they faithfully pay out. But the returns are so low that most savvy investors don’t really invest in bonds. The returns are just not good enough.

Single stocks are good. But the risk is high because it follows what we call the buy-pray-sell model, which means that a person doesn’t really know how the company is going to perform. And there’s really no way to know, because otherwise that’s called insider trading, right?

Without knowing how the company is going to do and what’s coming up, a person will buy stock, they’ll invest in it. They’re going to pray that it goes up and then hopefully it goes up and then eventually they sell once the stock goes up.

But if it goes down, there’s really no way to know how to prevent it and how to exit before it goes down.

The same thing happens with mutual funds. But when you invest, it’s just a conglomerate of stocks that hopefully when some go down, some go up. It evens out and therefore the risk is just spread out and diversified.

Another investment is single family homes. You can implement a business plan and execute it yourself. That’s a model that we call a business plan. You buy and execute. Single family is great from that aspect. The problem is that the risk is high because if a tenant leaves or something happens with the market, you can very quickly lose your income.

Last is multifamily. This is our favorite, and here’s why. With multifamily real estate, investor returns are high, but the risk is low. Why is the risk so low? It’s because of the amount of properties and the amount of apartments that are in the complex. It’s diversified.

Of course, there are other forms of investing that some choose to invest in and that are higher risk and that also have a higher return. But then again, the risk is substantially higher.

The reason that we specifically love multifamily real estate is because the risk is low enough and the returns are great. More and more savvy investors are getting in on multifamily real estate for its impressive risk and reward properties.

We understand investing can be filled with fear. It can be hard to know what’s actually going to give you promised returns. Set up an introductory call with us, we’ll answer every question you have and give you the data to back it up.

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