There is not enough risk in real estate investing
I had a mentor of mine tell me that a private equity guy told him that the reason that they do not buy real estate and instead invest in companies is that there is not enough risk in real estate
At first blush that statement does not seem to make sense but when you peel back the outer layers of that statement it is so simple it is perfect. I have always felt that if you want to make a lot of money you need to take huge risks
Along with this axiom I have always thought risk always equals return
The highest return I have ever profomed in a real estate deal is 14 percent. My friends in the private equity business tell me that they do not even look at deals that has a return of less than thirty percent . They say a lot of those deals end up paying nothing but it takes just a few to do as projected or a little better and you really are making money.
In real estate a great return is ten percent.
What does this mean if to want to invest in real estate? You need to go around looking for deals with the greatest amount of risk. So the next time you see an apartment building that is completely vacant it might be worth investigating
