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Low Risk and High Reward - the Unicorn of investing?
The old adage goes, "The Higher The Risk, The Higher The Reward". And although this does apply to many things in life, it does not always need to apply to real estate investing. A dabbling investor may use the "high risk, high reward" mantra as he determines his next investment vehicle, but truly Savvy Investors know the BEST strategies are the ones that combine low risk with high reward. Some may think it's a myth, like unicorns or gargoyles, but the low risk-high reward investment can be found - IF you know what to look for.
Most people look at risk as being the financial investment they put forth, but money is only one thing investors risk. There are two others: time and energy. The other two risk factors should be given just as much weight as a money risk, because your time and energy are worth a lot. Can investors limit ALL THREE and still get a great return? ABSOLUTELY!
Of course, there are many strategies out there, but since I specialize in a lease to own real estate strategy, I will use a lease to own in the following example. Lease to own is a perfect example of a low income, high return investment. First, because the tenant (who will soon be the owner) is putting in a deposit, your financial risk is minimal. In fact, I have done lease to owns where the client puts in the entire deposit, and I put in NOTHING. This lowers the financial risk for two reasons. First, if the tenant decides not to purchase the home or to pull a midnight move, they lose their money - which also lessens the chance they WILL pull a runner. I get another tenant as soon as I can. Low financial risk? Check!
Next, time and energy. When I first started in the real estate investing game, I was a slave to midnight calls of backed up plumbing, furnace problems, leaky roofs - you name it! Anyone who is a landlord can tell you a horror story (probably involving something smelly) about having to do maintenance on a property they own. And they should - it's the landlord's responsibility to maintain and upkeep the property, everything from shovelling snow to mowing lawns. With most real estate investments, you are a slave to circumstance. Unless you hire in an expensive maintenance company, it's all up to you - your time, and your energy.
In this example, because the tenant will soon be the owner, they are responsible for 100% of the maintenance and upkeep of the home - it's in their best interests not only to know what is happening with the house, but to fix it promptly so the house that will soon be THEIR home is not jeopardized.
Wouldn't you rather be sipping a cold beer (or tea or lemonade) on your patio on a Saturday afternoon than plunging a toilet? Of course you would!
Before you make any investment, put it through this quick test: Are you risking a lot of your money, time and energy? If the answer is YES to more than one, there are other investment strategies out there that will yield you BOTH low risk AND high return - no matter how mythical the idea may seem.
Mark Loeffler, dubbed The Versatile Investor by Canadian Real Estate Magazine is an expert real estate investor based in Toronto. Mark helps investors Canada-wide maximize their portfolios with rent to own investment strategies. In addition to his seminars, articles and personal mentoring, Mark blogs at www.theversatileinvestor.blogspot.com. His book will be released in Spring 2010. For more information and to sign up for the weekly ezine, The Secrets of Savvy Investors, visit www.theversatileinvestor.com