Investors of every kind look for the opportunities that they can count on. They want to be able to, at least to some degree, predict the future. While no worthwhile investment comes without risk, there is something to be said for the predictable, reliable, and proven.
In times like these, reliability and predictability seem particularly far away. So many of us feel like we’re standing in quicksand, with life, finances, and the future shifting beneath our feet.
Here’s a quick reminder from REI Nation: we’ve been here before. We’ve weathered storms of every kind. We always come out on the other side stronger and wiser, and now is no different.
With that said, we also understand the apprehension and fear that some real estate investors are feeling. For that reason, we have only increased our efforts to provide transparent, accurate, and up-to-date information for our investors and residents.
If you are a real estate investor facing uncertainty — be it because of COVID, your own individual investment markets, or financial issues — know that you can hedge against risk, hedge your bets, and make the most of your investments. Don’t panic. Instead, look to these essential considerations.
3 Factors Investors Must Consider in Uncertain Times
Your Personal Investment Goals
We can’t stress this enough: no two investors are the same. While we can all glean wisdom and direction from other successful investors, only you can determine the right decisions to achieve your specific investment goals and for your unique situation. Why are you investing? What is it you want out of your investments?
Now is the time to step back and reassess. This doesn’t just go for real estate investment, but for any type of investing you may be involved in. Right now, certain strategies may make more sense than others. Some won’t make sense right now. It’s valuable that you look to all of your investments and evaluate where they truly fit in your portfolio and if they are serving the purpose you desire.
The important thing is not to stop. Risk is more apparent, perhaps more abundant. That can scare investors away. Don’t let it — instead, use the opportunity to exercise greater due diligence and more targeted, purposeful investment decision-making.
Portfolio diversification is the cornerstone of investment success. What this does (buying in multiple different markets, specifically), is hedge against risk. It prevents the investor from putting all of their proverbial eggs in one basket.
Where some markets will be more dependent on the industries that will take more time to recover from COVID (such as hospitality, retail, and energy), others will have an easier time with recovery and overall market stability. The diversification of your portfolio allows multiple investments to sustain one another, even in trying times. The failings of one market don’t affect your whole portfolio — and thus, you have more ways to hedge against market risk.
Long-Term Versus Short-Term
During the last significant recession (that is, the Great Recession), many investors jumped into the ring for short-term gains on foreclosed properties. Flipping was popular. In fact, it still is. It’s always popular when the construction of affordable single-family housing falters. That’s been the case since the Great Recession.
However, part of the contribution to the Great Recession was this rising narrative, this daydream, of getting rich through flipping.
The get-rich-quick narrative of real estate flipping can be dangerous, particularly when the risks and downsides are ignored. While there can be short-term profit, there’s a lot more risk, too.
Be sure to check out: Manage Risk By Investing in Real Estate Long-Term
Right now, real estate investors would do well to consider their strategies and the risks involved. Know that a focus on the long-term and steady, stable investments will outlast market conditions. Will it be as exciting? Doubtful. But over time, it will be more effective and less risky in building future wealth.
Manage your exposure to risk.
Ultimately, a real estate investor’s success amid a tumultuous, unpredictable market comes down to your risk management skills. Every factor we’ve mentioned ties directly into due diligence and risk management.
It’s about looking at what you have, where you want to be, and how you want to get there. It’s looking at the details and understanding — seeing — where risk threatens your future wealth. For turnkey real estate investors, it’s easy. Rely on experienced professionals to manage your investments, direct you to reliable opportunities, and to advise you on how best to build your wealth through real estate investment.
Schedule your one-on-one call today and make a game plan for your financial future!