How to Reduce Your Risk When Investing in Rentals

There are few ways that you can achieve financial independence as quickly and reliably as with rental real estate investing. Real often increases in value overtime, making it a very safe investment to make, as well as offering the opportunity to grow your net worth and develop a stream of passive income for you and your family’s financial success. But just like with any form of investing, there is some risk, and there are ways to invest in real estate that are riskier than others. Here are three expert tips to help you reduce your risk when investing in real estate.

Keep Leverage at Bay

Leverage is the amount of debt you take on relative to the amount of equity you have. Leverage is the way you can invest in real estate, but also a risk that needs to be mitigated and managed properly to keep your investments and finances safe. When you have high leverage, it means that you have a lot of debt with very little equity, lower leverage means that you have more equity than debt. You want to make sure you keep leverage low when you can by putting 20% down whenever possible, and not overextending your portfolio.

Cover Your Properties with Insurance

Owning any sort of home means that you absolutely need homeowners’ insurance. It doesn’t matter whether you live there or not, it simply matters that you own an asset that can be damaged. Home insurance protects your property from theft, damage, weather, and all sorts of other issues. Home insurance can be much cheaper than paying out of pocket to replace part of your home. In the same way medical expenses work, you will be covered after you have spent a certain amount on home repair. Don’t neglect home insurance.

Take Things Slow

The unfortunate truth of real estate investing is that it truly is a long game, and there is no way around it. Real estate is very expensive, and so expanding your portfolio and paying off your debt takes a long time. There is no need to rush things. Take your expansion slow, only purchasing a new property once every one to two years depending on how quickly you can pay down your loans from your last property. Slowly but surely, you will reach your goal.

Real estate investing is a great financial step to take for anyone looking to take control of their financial future. But like with anything there is some risk involved. Follow these three steps to reduce your risk when investing in real estate as much as possible.

For more on real estate investment, check out this article here!

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