Today we begin a three-part series on risk reduction.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: Sometimes we take a topic and call it a buyer topic or seller topic. I would suggest many of the buyer topics will eventually be relevant to you as a seller. So let’s talk specifically today about risk reduction. At the time of your purchase, you can reduce the risk for the time of your sale.
Bob Nelson: And risk is in every investment. You cannot have a risk-free investment by the standard of measuring that in the United States. If you were very concerned with eliminating as much risk as possible, you would buy a T-bill, a Treasury Bill. You’d give the government your money and 91 days later, you get it back with a little higher amount which would be called your yield and in most instances it is a negative yield because inflation during that same time period has eroded away your yield.
You have to expect, and anticipate, and accept risk if you want a yield that’s an excess of zero.
Marcia Edwards: And when you’re looking at risk, risk and return, there’s a relationship there. It may appear like a higher risk, but it may have a high return because of that. So let’s talk about you staying in your wheelhouse, your comfort zone, but possibly reaching a little further in the big, large scale of risk to make sure you have an optimum return.
Bob Nelson: Well, the most important single thing is stick with what you understand. Now if you say, “I don’t understand anything,” then I would get wise counsel such as Marcia, if you’re buying a house. Such as me if you’re looking in terms of passive investment property. Stick with what you understand and if you don’t understand it well enough, there’s an outstanding book that’s available on the market, Mastering the Art of Commercial Real Estate Investing. Again, Mastering the Art of Commercial Real Estate Investing.
A friend of mine, Doug Marshall, wrote this thing this last year. Absolutely up to date, and full of good information.
Marcia Edwards: And it is something that’s great for even the simplest personal investment in real estate. I would encourage you to start possibly if you’re a single family, maybe the house you’re currently occupying. If it’s your first time buyer home, you can move out of that house, hold on to the house, and call that your first investment. So it could be what you understand. You are going to broaden what you understand over time.
But, as Bob says, what’s important is the counsel you have next to you. For example, if you’re going to become a property manager, either you know it that well, or you hire a professional, and you’ll be offsetting the risk that could be possible in a relationship with a tenant.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.