What's a reasonable return on investment in today’s market?
As you might expect, the answer is, “It depends!” Every
investor must accept risk in order to attain reward. Even
doing nothing is a risk with its own reward. The obvious goal
is to achieve maximum reward with minimum risk. Duh.
But what are the risks and how do you assess them? What are
the potential returns? What’s about the not-so-obvious
risks? And what’s reasonable to expect in today’s economy?
Balancing in our chairs behind The Real Estate Guys™ golden
microphones (actually, they’re black with smelly foam that prevents
our P's from popping too profusely), to talk through all of these
perplexities are your Host and mental gymnast, Robert Helms;
Co-host and floor tumbler, Russell Gray; and Chief spotter, the
Godfather of Real Estate, Bob Helms.
Real estate is as much an art as it is a science. There are so many
different markets, sub-markets, product types and deal structures
to choose from. Beyond that, there are variations in economic
conditions, seller motivations, tax laws, interest rates and on and
on and on. The types of returns which can be attained in a
real estate investment range from bankruptcy (on the VERY negative
side) to infinite returns (profit on nothing invested). We like the
latter better, don't you?
Recognizing that real estate investing is “non-traditional” when
compared to the conventional approach of "work hard, pay taxes,
live below your means and buy stocks, bond and mutual funds for the
long haul" - we talk about the ranges of returns which are
reasonable to expect when investing in certain kinds of real
estate. We also talk about how certain deal structures can
really improve your ROI.
Another topic of discussion is the risks of investing versus those
of NOT investing. There is an adage which says that the more
risk you take, the more return you should demand. We agree
with that one. Of course, it presupposes that you understand the
risks and can factor them into your decisions.
There is another adage which says that higher returns mean more
risk. NOT NECESSARILY! There are actually deal
structures which REDUCE risk while INCREASING return. So of
course, we talk about those things because they are among our
favorite benefits of real estate investing!
After this broadcast, we slipped off our leotards (sorry, bad
visual) and headed for the showers (worse visual!), pleased with
our performance. Now we’re waiting for the judges (that’s
you) to put our scores. We only ask that not take into
consideration what we look like in our leotards. And, that
you remember to take us to the gym because, as you probably already
know after the leotard visual, we REALLY need the workout!
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